The purpose of the payment plan is to deal amicably with a situation of late payment due to the buyer's cash flow difficulties.
It allows him to spread his payments over time according to his cash flow and avoid a litigation situation that would be detrimental to both parties.
If it goes well, it significantly strengthens the commercial relationship because the buyer will often be grateful to his supplier for having accompanied him during his difficulties.
Otherwise (for example in the event of collective proceedings by the customer), the seller will suffer potentially higher unpaid bills than if he had withdrawn earlier. The game is therefore risky and double-edged.
Therefore, it is necessary to follow certain principles before setting up a schedule to ensure that this solution is relevant for the supplier.
The first essential point before any discussion is to ensure the good faith of the buyer, ie his real will to honor his commitment to pay which is thwarted by financial difficulties. If there is a reasonable hope that he will get out of these difficulties, the amicable solution with a moratorium is to be preferred for the seller under certain conditions.
Its objective seeks above all to establish a pre-diagnosis of the financial situation of the company. It is only when the information below has been collected that it is possible to consider the proposal phase. If your client whish to honor his debt, it is often in your best interest to accept the establishment of a payment schedule.
You shall define conditions that are realistic for your client (he must be able to comply with the agreement) and for your company whose cash is certainly not infinitely expandable.
The signature of a contract (download tools below) and getting checks or bills of exchange gives you the best chance to finally being paid, except in cases of insolvency proceedings your client.
The establishment of a payment moratorium is a clear confession of cash flow problems that can be serious. It is therefore necessary to trim and reduce your risk with your client. This translates into more restrictive payment terms (deposits, cash with order, reducing the time of payment ...) and a decrease in credit limit.
However, in most of cases, there is no longer any question of negotiating a payment schedule because the debtor's liabilities are frozen and it is legally impossible to pay the invoices whose date of issue is prior to that of the judgment of the court of trade.
It is necessary to declare his debts to the judicial administrator so that they are taken into account in the statement of the debts realized that he carries out.
It allows him to spread his payments over time according to his cash flow and avoid a litigation situation that would be detrimental to both parties.
If it goes well, it significantly strengthens the commercial relationship because the buyer will often be grateful to his supplier for having accompanied him during his difficulties.
Otherwise (for example in the event of collective proceedings by the customer), the seller will suffer potentially higher unpaid bills than if he had withdrawn earlier. The game is therefore risky and double-edged.
Therefore, it is necessary to follow certain principles before setting up a schedule to ensure that this solution is relevant for the supplier.
The first essential point before any discussion is to ensure the good faith of the buyer, ie his real will to honor his commitment to pay which is thwarted by financial difficulties. If there is a reasonable hope that he will get out of these difficulties, the amicable solution with a moratorium is to be preferred for the seller under certain conditions.Standard questionnaire before setting up a payment schedule
This questionnaire is essential before making or accepting a payment schedule proposal so that it is optimized (obtaining payments as soon as possible) and realistic (requiring the client to provide a schedule that he is able to meet).Its objective seeks above all to establish a pre-diagnosis of the financial situation of the company. It is only when the information below has been collected that it is possible to consider the proposal phase.
Identifier les causes des difficultés financières
- What are the causes of your financial difficulties?
- What is the origin of your financial difficulties: drop in your turnover, seasonal activity, late payment by one or more customers, etc.?
Late payments with other third parties (other suppliers, Public Treasury)?
- Do you pay other suppliers late? How is it going ?
- Are you in arrears with States Treasury?
- Have liens been issued on your company (if so, the risk is higher)?
Assess the ability to ensure payment of future terms
- Regarding the deadlines of…. can you assure me of their payment on these dates?
Upcoming orders
- Do you plan to place new orders for equipment in the next X weeks – X months? If yes, for what amount?
Assess the expected cash flow
The repayment capacities of the buyer depend on these receipts.- Are you expecting cash inflows soon? When ?
- Have you drawn up a cash flow plan?
Principles for setting up a payment schedule
What are the prerequisites for a payment plan?- Require an immediate partial payment even of a small amount in order to get a proof of the willingness of your client to honor his debt,
- Shorten to the maximum the duration of the schedule of payment,
- Confirm the agreement by a writing contract signed by both parties. It will have a value of an acknowledgment of debt if you had to conduct a subsequent lawsuit to get paid,
- Get upon the signing of the agreement checks (or bank endorsed bills of exchange) to cash in accordance with the schedule deadlines.
If your client whish to honor his debt, it is often in your best interest to accept the establishment of a payment schedule. You shall define conditions that are realistic for your client (he must be able to comply with the agreement) and for your company whose cash is certainly not infinitely expandable.
The signature of a contract (download tools below) and getting checks or bills of exchange gives you the best chance to finally being paid, except in cases of insolvency proceedings your client. The establishment of a payment moratorium is a clear confession of cash flow problems that can be serious. It is therefore necessary to trim and reduce your risk with your client. This translates into more restrictive payment terms (deposits, cash with order, reducing the time of payment ...) and a decrease in credit limit.What to do in the event of bankruptcy?
This depends on each country regulation.However, in most of cases, there is no longer any question of negotiating a payment schedule because the debtor's liabilities are frozen and it is legally impossible to pay the invoices whose date of issue is prior to that of the judgment of the court of trade.
It is necessary to declare his debts to the judicial administrator so that they are taken into account in the statement of the debts realized that he carries out.
Conclusion
The implementation of a contractual payment plan (signed by the customer) has many advantages:- Preservation of the commercial relationship.
- Avoids (if all goes well) litigation.
- Get paid faster.
- Equivalent to an acknowledgment of debts (the certainty of the debt is no longer in doubt) which can be used in the event of legal action.
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