Collecting in Germany
The payment behaviour of domestic firms is good and the courts are efficient in delivering timely decisions. Professional pre-legal negotiation efforts remain the most efficient means of collecting debt. The purpose of insolvency proceedings in Germany has long been to realise the debtor’s assets to repay the creditor’s debt. As a result, liquidation has in practice remained the default procedure and the system provides no genuine support to unsecured creditors when it comes to collecting debt from insolvent debtors.
Availability of financial information
Access to financial information on German companies has improved since business reporting obligations were put in place in 2007.
All limited liability companies must register with the Commercial Registrar of the local court at the corporate seat of the business, but this is not mandatory for small businesses operated by a private individual or through a civil law partnership.
Days Sales Outstanding (DSO)
The payment behaviour of German companies is good - with the average DSO at 53 days in 2016 - and, generally, short delays may be explained by a tendency to rely on supplier credit, rather than on bank credit. As a general rule, German partners want to preserve their credit history and so do what they can to avoid late payments.
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Late payment interest
The core principle under German law is that the debtor, however late with payments, has to compensate and/or reimburse the damages caused by the late payment to the creditor. Business-to-business transactions must be paid within 30 calendar days and late payment interest may be claimed as soon as this has elapsed.
Although German courts are reliable and fairly efficient, it is advisable to first consider amicable settlement opportunities as an alternative to formal proceedings.
Before starting legal proceedings against a debtor, assessment of assets is important as it allows verification as to whether the company is still active and whether recovery chances are at their best. In addition, it is essential to be aware of the debtor’s solvency status: if insolvency proceedings have been initiated, it becomes impossible to enforce a debt.
Read the full report to better understand the nature of collecting payments in Germany. Our export finance experts are happy to help make exporting easier, discuss your ideas and offer finance solutions tailored to your company needs.