B2B debt collection glossary

The terms of debt collection and accounts receivable management, explained simply — without unnecessary jargon.

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DSO (Days Sales Outstanding)

A metric measuring the average number of days between invoicing and actual cash collection. It’s calculated as: (accounts receivable / revenue including tax) × number of days in the period. The higher the DSO, the more cash a company has tied up in receivables not yet paid. See our dedicated guide: reduce your DSO and aged receivables.

Working capital

The amount a company must permanently finance to cover the gap between its outgoing payments (purchases, salaries) and its incoming payments (customer payments). A high DSO mechanically inflates working capital needs: the later clients pay, the more cash a company must advance to keep operating while waiting to be paid.

Aged receivables

A table breaking down all outstanding customer receivables by age (for example 0-30 days, 30-60 days, 60+ days). It shows at a glance where the risk is concentrated: aged receivables growing heavier in the older brackets signal debts becoming increasingly harder to collect.

Statute of limitations

The deadline beyond which a creditor loses the right to sue to recover a debt. For a commercial debt between businesses in France, this period is 5 years from the due date (Article L110-4 of the French Commercial Code). Certain acts (a debt acknowledgment, legal action) interrupt this period and reset it to zero.

Formal notice

A formal letter, usually sent by registered mail with acknowledgment of receipt, demanding the debtor pay a specific amount within a given deadline. It marks the shift to a firmer stage of amicable collection and is an almost systematic prerequisite before any legal action.

Payment order

A simplified legal procedure that lets a creditor obtain an enforceable order for a certain, fixed, and due debt, without a prior contested hearing. The court issues an order based on the file provided (invoices, purchase orders, formal notice) if it is complete and undisputed by the debtor.

Amicable collection

All the steps taken to obtain payment of a debt without involving a court: phone and written follow-ups, then a formal notice. It’s the route to favor first, as it’s faster, cheaper, and preserves the business relationship.

Legal collection

All the court procedures used to obtain forced payment of a debt when amicable collection has failed: a payment order for undisputed debts, or a full lawsuit in case of dispute or a more complex case.

Late payment penalties

Interest automatically applied from the first day a business-to-business invoice is overdue, at the European Central Bank (ECB) rate plus 10 points. These penalties must be stated explicitly on the invoice to be enforceable against the debtor.

Fixed collection compensation

A fixed sum of €40 automatically owed by the debtor in case of late payment between businesses, in addition to late payment penalties, intended to cover part of the collection costs incurred by the creditor.