Invoicing and payment deadlines: the essential rules for your business

The invoice. This document, often perceived as a simple administrative formality, is in fact much more than that. It's the cornerstone of your commercial relations, an essential piece of evidence and a vital tool for good cash flow management. Inaccurate invoicing or poorly managed payment deadlines can quickly lead to financial difficulties, costly disputes and even penalties. In the business world, clarity and rigour in these areas are not an option, but a necessity.

Our firm regularly observes situations where errors or oversights in invoicing or payment deadlines create avoidable complications for businesses. The purpose of this article is to explain the fundamental legal obligations that you need to be aware of and comply with, whether you are a seller or a buyer in a professional context. We'll look at the information that must appear on your invoices, the rules governing their transmission and storage, and the sometimes complex legal framework for inter-company payment terms.

What must your invoice contain?

Far from being an open-ended document, B2B (business-to-business) invoices are strictly regulated by the French Commercial Code, in particular article L.441-9. Each item of information is important in ensuring transparency and preventing disputes.

Price and discounts: the basis of the transaction

The heart of the invoice is, of course, the pricing information. It must be precise and unambiguous. You must indicate the unit price excluding VAT of each product sold or service rendered. The mention of VAT is not required by competition rules (but it is required by tax rules, of course). If the price is indicated without the words "exclusive of tax" or "inclusive of tax", case law generally considers that it is exclusive of tax if the contract is silent.

The price reductions (discounts, rebates) must also be mentioned, but please note that only those that are acquired at the time of sale or service and directly linked Any specific conditions attached to this operation must appear on the initial invoice, as required by article L.441-9 of the French Commercial Code. Consider, for example, an immediate quantity discount. On the other hand, end-of-year rebates conditional on an annual purchase volume, or discounts for early payment that have not yet been decided or explicitly provided for on the invoice, do not have to appear on the invoice initially. They will be the subject of subsequent credit notes if the conditions are met.

The aim is to prevent conditional advantages or advantages not directly linked to the immediate transaction from distorting the basis for calculation, particularly for the resale at a loss threshold (a subject we will cover in another article).

Terms of payment: anticipating payment

To avoid misunderstandings and facilitate collection, the invoice must include clear information on payment, in accordance with Article L.441-9 of the French Commercial Code:

• La the exact date on which payment is due. Indicating a deadline ("payment within 30 days") is generally not sufficient; a precise date (day, month, year) is required.
• The discount conditions applicable if your customer pays before the agreed deadline. Even if you don't offer a discount, it's a good idea to mention it (for example, "Discount for early payment: none").
• Le rate of late payment penalties payable from the day after the payment deadline indicated. This rate may not be lower than the legal minimum (currently three times the legal interest rate) and is, unless otherwise agreed, based on the refinancing rate of the European Central Bank plus 10 points. These penalties are due ipso jure, without the need for a reminder, as specified in article L.441-10 of the French Commercial Code.
• The amount of thefixed indemnity for collection costscurrently set at 40 euros by article D.441-5 of the French Commercial Code. This indemnity is payable in addition to the late payment penalties for each invoice paid late.

Other essential information

In addition to the price and payment terms, other information is required to ensure that the transaction and the parties are clearly identified, in accordance with Article L.441-9 of the French Commercial Code:

• Le name and address of the parties (seller and buyer). The address of the registered office is the reference, but the address of a secondary establishment may be tolerated if it is the place of the commercial relationship and payment.
• L'billing address if it is different from the main address of the parties. This recent addition is intended to facilitate direct routing of the invoice to the relevant accounting department.
• La date of sale or the completion of the service provision.
• La quantity and the precise name products sold or services rendered. A vague designation ("Miscellaneous") is insufficient; it must allow clear identification of what has been supplied, potentially including the brand name or specific characteristics if necessary.
• Le Purchase order number if it has already been drawn up by the buyer. This makes it easier to reconcile the order with the invoice.

This information forms a coherent whole aimed at ensuring the transparency and traceability of trade.

Issuing, storing, communicating: practical aspects

It's one thing to draw up a proper invoice, but it's quite another to manage it correctly. The law also governs the way in which invoices are circulated and stored.

When and how do I send the invoice?

The principle is simple: the invoice must be issued by the seller on completion of delivery goods or thecompletion of the serviceas required by article L.441-9 of the French Commercial Code. You don't have to wait for the customer to ask for it.

Transmission can take place in the following ways on paper (in duplicate, one for each party). But the electronic invoicing is now widely accepted and encouraged, provided that certain conditions are met to guarantee the authenticity of the origin, the integrity of the content and the legibility of the invoice (in accordance with Article 289 of the General Tax Code). Transmission by fax may also be considered, although it is less secure.

Some relaxations exist :

• A slight deferred invoicing of a few days may be tolerated for administrative reasons.
• For multiple and regular deliveries or services to the same customer during the same calendar month, one periodic invoice (or recapitulative) statement may be drawn up, grouping together these transactions. It must be issued by the end of that month at the latest, as permitted by article 289 of the General Tax Code.

Who is affected by these rules?

The obligation to invoice applies very broadly to "any purchase of products or provision of services for a professional activity". under the terms of article L.441-9 of the French Commercial Code. This concerns :

• Producers, manufacturers, traders (wholesalers, retailers).
• Service providers, including self-employed professionals providing services to professionals.
• The craftsmen.
• Farmers in their professional relations.
• Even public bodies (State, local authorities, public establishments) when they carry out production, distribution or service activities, by virtue of article L.410-1 of the French Commercial Code.

Some exceptions or special features exist :

• The individuals are not obliged to issue an invoice when they occasionally sell to a professional (unless the sales become habitual or significant). Conversely, a professional selling to a private individual is generally not required to issue an invoice within the meaning of the French Commercial Code (but often a note or till receipt under other regulations).
• The intermediaries acting in the name and on behalf of others (agents, brokers for the sale itself) do not invoice the principal sale but their own commission.
• For the international transactions (exports), the authorities allow a degree of flexibility in relation to the strict French rules, so as not to penalise French companies. On the other hand, a French importer must ensure that he receives an invoice that conforms to the French rules or includes the essential elements required in France.

How long can you keep your invoices?

Invoices are accounting documents and legal proof. It must therefore be kept. Article L.441-9 of the French Commercial Code refers to the periods set out in the General Tax Code. In practice, this means that invoices (customer and supplier) must be kept for a period of six years from a tax point of view (recovery period for the administration, governed by the Book of Tax Procedures).

From a commercial point of view, the French Commercial Code (article L.123-22) requires accounting documents and supporting evidence to be kept for ten years from the end of the financial year. It is therefore advisable to use this ten-year period to archive your invoices, whether in paper or electronic form (in conditions that guarantee their integrity and legibility).

Payment terms: a strict legal framework

Inter-company credit is a major component of the economy, but excessively long payment periods can leave creditor companies vulnerable, or even suffocated. That's why the law strictly regulates payment periods.

Default period and legal ceilings

What happens if you have made no specific arrangements with your commercial partner? Under Article L.441-10 of the French Commercial Code, the law lays down a supplementary deadline payment must be made no later than 30th day following the date of receipt of the goods or performance of the service requested.

The parties may, however, agree on a different time limit, which may not exceed certain limits. legal ceilings imperatives defined in the same article L.441-10 :

• The agreed deadline cannot never exceed 60 days net from the date of issue of the invoice.
• By way of derogation, a maximum period of 45 days end of month from the date of issue of the invoice may be agreed. This period must be expressly stipulated in the contract and must not constitute a manifest abuse of the creditor (which would be the case, for example, if it were imposed without justification by a powerful customer on a small supplier).  

It is therefore prohibited to contractually provide for payment terms of 90 days or more, a practice that was common in the past. Similarly, any clause or practice aimed at artificially delaying the starting point of the term (for example, by linking the start of the term to an excessively long internal validation) is prohibited and punishable under article L.441-16 of the French Commercial Code.

Specific rules for certain sectors

Article L.441-11 of the French Commercial Code provides for shorter maximum payment periods to take account of the specific characteristics of certain sectors. This is particularly the case for :

• The perishable agricultural and food productsfrozen meat and frozen fish: 30 days after the end of the ten-day delivery period (or after the delivery date, as the case may be).
• Le live cattle intended for consumption and fresh meats derivatives: 20 days after the day of delivery.
• Some alcoholic beverages (particularly spirits): 30 days after the end of the month of delivery.
• Le road haulageInvoices for services rendered, vehicle hire and transport commission: 30 days after the invoice date.
• Other sectors such as agricultural equipment, winter sports goods, leather, watches and jewellery, and toys also benefit from specific rules.

These specific deadlines take precedence over the general deadlines of 60 days / 45 days end of month.

The impact of verification/acceptance procedures

Some contracts provide for a procedure to check the conformity of goods delivered or services rendered before payment is triggered. The law (article L.441-10 of the French Commercial Code) provides a framework for this practice: the duration of this procedure must be reasonable (set according to custom, without exceeding 30 days by default) and must not normally be used to shift the starting point or increase the duration of the legal maximum payment period, unless there is a specific, non-abusive contractual agreement.

Who is responsible and what are the penalties?

Compliance with invoicing rules and payment deadlines is more than just a recommendation. Administrative sanctions exist, and responsibility can be shared.

Incorrect invoicing: a shared responsibility

The law, in application of article L.441-9 of the French Commercial Code, is clear: the obligation to issue an invoice that conforms to the terms of the contract falls on the seller. seller or the service provider. But thebuyer The professional is also obliged to request it if it is not issued spontaneously, and to ensure that it contains the compulsory information.

In the event of an inspection by the authorities (in particular the DGCCRF - Direction Générale de la Concurrence, de la Consommation et de la Répression des Fraudes), both parties may be held liable if the invoice is missing or does not comply. Imagine the headache if you belatedly discover that your supplier invoices are not compliant during a tax or commercial audit...

Administrative penalties for non-compliance

Breaches of the rules on invoicing and payment periods are mainly subject to administrative penalties imposed by the DGCCRF:

• For the breaches of invoicing rules (missing information, failure to issue, etc.), the administrative fine may be as high as 75 000 € for an individual and 375 000 € for a legal entity, pursuant to article L.441-9 of the French Commercial Code. These amounts are doubled if the offence is repeated within two years.
• For the non-compliance with payment deadlines (exceeding the ceilings), the penalties are much heavier: Article L.441-16 of the French Commercial Code provides for an administrative fine of up to 75 000 € for an individual and 2 million euros for a legal entity. Here again, the amounts are doubled in the event of a repeat offence.

In addition, the administration can order the publication of the sanction decision at the expense of the sanctioned company, on its own website and in the press (article L.470-2 of the French Commercial Code). Name and shame" can have a significant impact on a company's reputation.

The complexity of the rules governing invoicing and payment deadlines, and the severity of the penalties incurred, require constant vigilance and good internal organisation. To ensure that your practices are compliant, review your invoice models, or secure your payment terms in your contracts, our firm can audit your processes and documents.

Advice tailored to your situation could save you time and resources. Contact us to find out more.

Sources

• Commercial code
• General Tax Code
• Book of tax procedures