Customer Credit Control in France: Managing Your Credit Exposure

Customer credit control in France starts with the en-cours client

Every time you deliver goods or services before you are paid, you are lending money to your customer. Customer credit control in France is the practice of measuring and containing that loan. The first concept to master is the en-cours client — the total outstanding credit exposure on a given customer at a given moment. It is a wider figure than the accounting balance of the customer account, which only captures invoices issued and awaiting payment.

The global en-cours client adds several layers to that accounting balance. To the unpaid invoices you must add any bills of exchange (effets de commerce) still in your portfolio at the cut-off date, because your exposure covers every invoice issued and not yet actually settled, whatever the agreed means of payment. You should also factor in the order book: accepted orders not yet invoiced still commit you to deliver, and each future delivery will convert into a further receivable.

For businesses that make goods to order or carry customer-specific stock, work in progress and dedicated inventory belong in the exposure calculation too. Any deposits (acomptes) already received reduce the figure. The point is to see the whole engagement you carry on a customer — not just what has been billed — so that a single ledger view tells you how much you stand to lose if that customer fails.

Building a credit policy and per-customer credit limits

Sound customer credit control in France rests on a written credit policy: the rules by which you decide who gets credit, how much, and on what terms. When you open a customer account you should fix an authorised outstanding — a ligne de crédit or credit limit — reflecting the maximum risk you are prepared to run with that customer as part of your commercial strategy. The real en-cours must stay below that authorised limit, or you are carrying more risk than you decided to accept.

The limit is not a number pulled from the air. It should be built from what you can learn about the buyer's solvency before and during the relationship: its registration and published accounts, payment-incident registers, commercial credit-agency reports, and the day-to-day signals your sales team picks up. We cover the pre-contract checks in a separate guide on how to check a French company before you sell; credit-limit management france is the ongoing counterpart to that one-off due diligence.

The limit then has to work in real time. When you accept an order, check that its amount — combined with the agreed delivery and payment terms, and everything already delivered but unpaid — will not push the customer past its authorised outstanding. Repeat the check immediately before each delivery, because a payment delay arising after the order was accepted may mean that invoicing the new delivery breaches the limit. Where the limit would be exceeded, the normal response is to hold the order or the delivery rather than proceed.

Tracking days sales outstanding and the ageing balance

To steer credit exposure you need two recurring measurements: how long your customers actually take to pay, and how your receivables are ageing. The most common ratio expresses the customer balance in days of sales — days sales outstanding, or crédit client in days. You divide the sum of the customer balance, bills receivable and discounted bills not yet due by average monthly turnover including tax, then convert to days.

A worked figure makes the method concrete: an en-cours client of 40,008 K€ against an average recent month of 25,350 K€ of turnover gives 1.58 months, or roughly 47 days of customer credit. An alternative Anglo-Saxon method, sometimes called the exhaustion or back-track method, subtracts each prior month's turnover in turn until the balance is used up, giving a comparable figure of around 45 days. Tracking that number over time shows whether your collection performance is drifting.

The second instrument is the ageing balance (balance âgée), a fundamental document for reviewing customer accounts. It lists the invoices customer by customer and classes them by due date, taking account of deposits, partial payments and credit notes. Reading the overdue and not-yet-due columns lets you value each receivable and spot the danger patterns: customers who never pay yet keep receiving deliveries, old disputes on otherwise sound payers, and customers paying partially while their arrears grow.

Ageing analysis is where customer credit control in France becomes forward-looking rather than a post-mortem. A customer sliding from 45 to 75 days, or one whose partial payments no longer keep pace with new deliveries, is telling you to act before the exposure becomes a bad debt. The ageing balance is also the working document your credit controller uses to run the dunning cycle described below.

Risk-transfer tools: credit insurance, factoring and guarantees

Measuring exposure is only half the job; the other half is deciding how much of it to keep and how much to transfer. Several instruments let a French business shift customer credit risk to a third party. Credit insurance (assurance-crédit) covers the risk of non-payment up to an insured limit set for each buyer. Factoring (affacturage) sells your receivables to a factor, which advances the cash and, depending on the contract, may assume the non-payment risk. Guarantees and advance payment shift risk contractually rather than through a financial institution.

None of these tools removes the need to watch the en-cours — they change what happens when it is exceeded. Both a credit insurer and a factor set ceilings on the outstanding they will cover for each customer. Anything above that ceiling is uninsured or unfactored and sits entirely on your own balance sheet. So the authorised credit limit you set internally should be reconciled with the insured or factored ceiling, and a customer approaching either figure is a signal to hold further supply on open credit.

Asking for money up front is the simplest transfer of all. A deposit (acompte) or advance payment reduces the exposure euro for euro and, as we will see, also underpins your right to suspend delivery. For higher-value or longer-term supply, a bank guarantee or an autonomous first-demand guarantee gives you a solvent party to call on. The right mix depends on margins, competition and how much friction your customers will tolerate, which is why we treat these instruments in depth in our guide on securing payment in France.

A dunning and escalation workflow that protects your position

Consistent chasing is the operational heart of customer credit control in France. A structured dunning cycle both recovers cash faster and builds the paper trail you will need if the account ends up in dispute or the customer becomes insolvent. The goal is graduated pressure: a friendly reminder before an invoice falls overdue, firmer written demands as arrears grow, and a formal notice (mise en demeure) that starts default interest running and preserves your rights.

Escalation should be tied to the ageing balance and the credit limit, not to individual moods. Each stage should be documented, and the file should record when supply was held, when cash payment was required, and when formal notice was sent. That record matters: it evidences that you acted reasonably and gave the customer a chance to cure, which protects you if the customer later argues that you cut it off abruptly.

Under French rules the formal notice is a meaningful legal step, not a formality. It fixes the moment from which late-payment interest and the statutory recovery costs run, and it is the trigger for several of the seller's remedies. Because those consequences flow from it, the notice should identify the invoices, the sums due and a clear deadline, and be sent by a means that proves receipt.

Triggers to tighten terms or stop supply

Effective credit control depends on reacting to warning signs before a customer defaults outright. French courts recognise that only buyers offering comparable solvency guarantees can claim identical selling terms. When objective indicators erode the trust that must exist between buyer and seller, the supplier is entitled to impose different conditions — and cash payment in particular.

The classic warning indicators are worth building into your monitoring. They include repeated requests to extend due dates, refusals to accept or pay bills of exchange, a rising debit balance on the customer account, and a marked reduction in the guarantees the buyer's banks or credit insurers are willing to extend to it. Any of these should prompt a review of the customer's credit limit and, often, a switch to stricter terms.

Two levers respond to these triggers. The first is imposing cash payment or a deposit going forward, which French courts uphold where the customer's payment behaviour has deteriorated. A supplier is not required to act as its customer's banker; if it extended credit because it could discount the resulting bills, and that facility dries up for lack of the buyer's financial standing, it may refuse further term payment and even further supply. The second lever is suspending or refusing supply, addressed in the next section.

Stopping supply without triggering a rupture brutale problem

The sharpest tool in customer credit control in France is also the most dangerous to use carelessly: cutting off a customer. French law gives a supplier real freedom here. A business may refuse the order of a notoriously insolvent professional, and the courts accept a refusal to sell where the customer already carries an excessive outstanding with the supplier. Refusal to sell between businesses is not, in itself, unlawful.

Where there is a live contract, the cleaner route to a temporary stop is the defence of non-performance (exception d'inexécution). A party may refuse to perform an obligation, even one that is due, if the other party is not performing its own and that non-performance is sufficiently serious. That lets a supplier suspend deliveries while the customer fails to pay, without going to court first. It works best where the contract ties each delivery to payment of the previous one, or requires a deposit before delivery; a supplier of instalment deliveries can then withhold the next tranche until the last is paid.

The trap is the abrupt termination of an established commercial relationship (rupture brutale). Where a supplier and customer have had an established, ongoing relationship, French competition law requires reasonable written notice before ending it, proportionate to the length of the relationship — quite apart from any contractual notice. Simply switching off a long-standing customer overnight, even one that pays slowly, can expose you to damages under this rule. A serious, proven payment default can justify termination without notice, but the safe course is to document the default, give formal notice, and keep a record that the customer had the chance to cure.

Putting ongoing customer credit control into practice

Credit control is a cycle, not a one-off decision at account opening. The pieces described above — the global en-cours, a per-customer limit, DSO and ageing analysis, risk-transfer cover, a dunning workflow, and clear triggers — only protect you when they run continuously and feed one another. Data quality is the foundation: the customer sub-ledger and the other sources that feed the exposure figure must be reliably and regularly updated, or the limit you enforce is measured against stale numbers.

For a foreign supplier selling into France, the same framework applies, with two additions. First, reconcile your internal limits with any credit-insurance or factoring ceilings so you never carry uncovered exposure unknowingly. Second, build your terms of sale around French realities — statutory payment-term caps, mandatory late-payment penalties, a retention-of-title clause, and the refusal-of-supply and cash-payment clauses noted above. Good terms make the levers in this guide usable when you need them.

Treated as a routine, this discipline keeps your credit-limit management france programme ahead of trouble: exposure stays inside limits you chose, deteriorating customers are caught by their ageing profile, and the tools to tighten terms or stop supply are ready and documented before a default turns into a loss.

Frequently asked questions about customer credit control in France

What is an en-cours client?

The en-cours client is the total credit exposure you carry on a customer at a given moment. It is wider than the accounting customer balance: it adds bills of exchange still in your portfolio and accepted orders not yet invoiced, and it can be reduced by deposits received. Managing this global figure — not just unpaid invoices — is the foundation of credit control.

How do I set a credit limit for a French customer?

Fix an authorised outstanding (a ligne de crédit) when you open the account, based on the customer's solvency: its published accounts, payment-incident registers, credit-agency reports and your own trading history. The limit should be checked in real time at order acceptance and again before each delivery, and reconciled with any credit-insurance or factoring ceiling in force.

What is factoring in France?

Factoring (affacturage) is the sale of your receivables to a factor, which advances the cash and, depending on the contract, may take on the non-payment risk. The factor sets a ceiling per buyer, so exposure above that ceiling remains on your own account. It sits alongside credit insurance as a way to transfer part of your customer credit risk.

When should I stop supplying a customer?

Consider stopping or restricting supply when a customer exceeds its credit limit, ages well beyond your terms, or shows warning signs such as repeated requests to extend due dates or reduced bank and insurer support. Often the first step is to require cash payment rather than a full cut-off, and to send a formal notice before withholding further deliveries.

Can I cut off a customer suddenly?

Not safely if you have an established, ongoing relationship. French competition law requires reasonable written notice before ending an established commercial relationship (the rupture brutale rule), and an abrupt cut-off can expose you to damages. A serious, documented payment default can justify ending supply, but suspending under the defence of non-performance and giving formal notice is the safer route.

What is the exception d'inexécution?

It is the defence of non-performance: a party may refuse to perform an obligation, even one that is due, if the other party fails to perform its own and that failure is sufficiently serious. For a supplier it means you can suspend deliveries while the customer fails to pay, without suing first — particularly where each delivery is tied to payment of the previous one or to a deposit.

What signals should trigger stricter payment terms?

Objective indicators that erode trust justify tightening terms: repeated requests to extend due dates, refusals to accept or pay bills of exchange, a rising debit balance on the customer account, and a marked reduction in the guarantees the buyer's banks or credit insurers extend to it. On these signals a supplier may impose cash payment, especially where its terms of sale reserve the right to do so.

How our French lawyers help with customer credit control in France

Petroff Avocats advises suppliers and buyers on the full credit-control cycle. For sellers, we draft general terms of sale that make your levers usable — refusal-of-supply and cash-payment clauses, retention of title, compliant payment terms and penalty provisions — and we guide you on setting credit limits, using the exception d'inexécution, and stopping supply without falling foul of the rupture brutale rule. For buyers facing tightened terms or a threatened cut-off, we assess whether the supplier's conduct is lawful and help you protect the relationship. We also act on recovery, security instruments and disputes when an account deteriorates.

This article is for general information only. It does not constitute legal advice and does not create a lawyer-client relationship. The law and its application depend on the facts of each case and may change. Contact our French lawyers for advice on your situation.