What is a reminder?
Businesses depend on their invoices being paid as quickly as possible - smaller ones even more than larger ones. If small businesses, such as craft enterprises, suffer defaults due to unpaid invoices, this can have serious consequences - up to and including the dismissal of employees or even the closure of the business.
In order to prevent this, companies first try to activate their customers themselves in a direct way by sending them a reminder to pay quickly.
The most important questions at a glance
What is a commercial reminder?
The payment deadline set in the invoice has already expired, but the outstanding amount has not yet been paid – then the reminder run starts. This can vary from company to company. There is no prescribed form, neither for the number of reminders nor for the wording.
A reminder is a specific and unambiguous request by the creditor to his debtor to perform the service owed. The basis is always a claim that is already due, for example from an invoice that has been issued and for which the payment deadline has already expired or from a recurring service that has not been paid by the set deadline. If the payment deadline has expired in this case, the debtor is in default – even without a reminder!
In the case of an out-of-court reminder by the creditor himself, one often speaks of a "commercial reminder".
Purpose of the reminder
When is a reminder mandatory or necessary?
Misplaced, forgotten or overlooked – it can happen to anyone. For this reason, companies remind their customers of the outstanding invoice with a reminder before taking further steps.
For many companies, sending payment reminders is an important part of their customer service to maintain good customer relations. From the entrepreneur's point of view, however, this step is also enormously important in order to minimise amounts receivable as quickly as possible. Any delay in payment can have immense consequences for the company.
A reminder puts the debtor in default – if the invoices or contracts have not already been drawn up in such a way that default occurs even without a reminder in the event of non-payment. The exceptional cases are regulated by law.
Reminder, costs and default
A reminder can be sent in different ways. How a reminder is sent usually depends on how the general communication between the contracting parties is conducted – but as a rule it is done in writing by letter or by e-mail.
If you usually communicate by e-mail, it is worth taking a look at the spam folder in your e-mail inbox every now and then. It can happen that such an e-mail is sorted out as spam for various reasons.
A specific form of reminder is not prescribed. The reminder may also be given orally. The word "reminder" or the announcement of certain consequences are not required.
The following contents are helpful for the recipient:
- Name, address of the creditor and the debtor
- Date and due date of the invoice
- Invoice and delivery note number
- Amount of the outstanding payment
- Default interest and dunning costs incurred
How high may dunning charges be?
Default costs may be charged from the first reminder after occurrence of default onwards. However, there is no clear legal regulation on the amount: reminder costs of 1.95 euros up to 5 euros per reminder are common. In addition, the creditor may also charge interest on arrears. - The base interest rate is always set by the German Bundesbank on 1 January and 1 July of each year.
When does default start?
The day on which a debtor falls into arrears is important for the calculation of costs. All costs incurred by the creditor from this point on must be reimbursed by the debtor. The creditor incurs unnecessary additional expense due to the failure to pay and the dunning process that is necessary as a result. The costs incurred are referred to as delay damages or damages for delay.
Default may occur without a reminder, among other things, if the conditions regulated in § 286 BGB (German Civil Code) are met:
- Fixed or calculable date: If a specific payment date or a specifically calculable payment period is contractually agreed, no warning notice is required.
- Automatic default: Default occurs automatically at the latest 30 days after the due date and receipt of an invoice or equivalent statement of payment if the customer does not meet his payment obligations and, as a consumer, he was specifically informed of this. However, it is ineffective to regulate the waiver of a reminder through general terms and conditions.
- Refusal to pay: If the consumer seriously and definitively refuses to pay, a reminder is not required. It must be clear from the statement that the refusal is the definitive last word.
- Self-reminder: If the debtor of the claim bindingly agrees to pay, but then does not keep the agreement, this is called a self-reminder. The same applies if the performance was expressly announced – such as in the case of a failed direct debit collection.
There is no rule or legal obligation as to how many reminders must be sent before a company may hand the matter over to a lawyer or debt collection agency.
To spare their customers the inconvenience, many companies first try to get their accounts receivable under control themselves.
As the name suggests, this is to remind the customer that payment is due. The company assumes that the obligor only forgot to pay the bill.
If the invoice for a product or a service is not paid despite the subject matter of the contract having been provided, the dunning process starts with the 1st reminder.
There is no legal regulation on how many reminders should be sent. Each company decides for itself. A 2nd reminder has the advantage for the customer of a further deferral of payment.
The final reminder is the "last chance" to clear things up before further steps are taken – which usually cost a lot of money. So you should not let this deadline pass.
It is a common misconception that a defaulting debtor must be requested to pay three times before the creditor may take further action.
Consequences and limitation
Theoretically, one could initiate the judicial dunning procedure immediately after the default has occurred. This is a simple, abbreviated legal procedure that can be used to avoid costly civil proceedings. The judicial dunning procedure basically runs entirely through written channels, without the need for a personal appearance in court. In the first step, the creditor submits a written application for a default summons. Forms for this are available in stationery shops or on the Internet.
As a rule, outstanding claims become time-barred after three years. The regular limitation period always begins at the end of the year in which the claim arose – i.e. the cut-off date is 31 December.
If the claim is legally enforceable through judicial dunning proceedings or legal action, the limitation period is 30 years.
- Warning notice: § 286 I, 2 BGB
- Damages for delay: §§ 280 I, II, 286 BGB
- Default interest: § 288 BGB
- Limitation: § 214 I BGB