Invoices that go unpaid and large, planned incomings that do not materialize can put your business at serious risk of going under. Efficient accounts receivable management is therefore one of the cornerstones of a successful business in Germany.

In this article, learn about what accounts receivable management means, how it differs from dunning and payment collection, and what the statutory requirements are for businesses regarding payment terms, due dates, and late payments. We will also explain how automating your processes can reduce your outstanding receivables and how Stripe can help you improve your accounts receivable management.

Key takeaways

• Structured accounts receivable management helps businesses reduce payment defaults and secure liquidity long term.
  
• Under certain circumstances, dunning is not required for a payment to be considered late, triggering legal and financial consequences.
  
• Dunning and payment collection are different stages of escalation within the accounts receivable process.
  
• In the event of a late payment, businesses can charge late payment interest and appropriate dunning charges, subject to the statutory regulations.
  
• Digital solutions and automation can improve accounts receivable management and help you manage your outstanding receivables more efficiently.
  

What is accounts receivable management?

Accounts receivable (AR) management includes all the steps your business takes to systematically monitor and manage your outstanding receivables and to minimize payment defaults. The goal is to shore up your liquidity and stabilize your cash flow without having to take legal action immediately.

Businesses in Germany do this by establishing principles for how they react to late payments. A structured approach can help you reduce your days sales outstanding (DSO) and mitigate financial risks early. The most important aspects of any AR management workflow include defining clear responsibilities, establishing structured dunning processes, and conducting payment collection where necessary.

The term AR management is frequently used interchangeably with debtor management, though the two are not identical. AR management is part of debtor management, which also includes operational and accounting activities. Debtor management refers to all processes, from invoicing to receiving payment. AR management focuses solely on monitoring, managing, and collecting outstanding receivables.

Common causes of late and unpaid invoices

Delays in payment and payment defaults can be caused by issues on the customer side or at the invoicing business. Here are some of the most important causes:

Internal causes

• Inadequate credit checks: Not conducting an adequate risk assessment before signing a contract increases the likelihood of payment defaults.

• Incomplete or incorrect invoices: Invoices that are missing mandatory information, have incorrect amounts or tax rates, or contain other errors that must be corrected or reissued, which can delay payment.

• Unstructured AR management processes: Monitoring outstanding receivables consistently or on time can be more difficult if you don’t have clearly defined responsibilities or workflows.

• Poor communication: Being too vague in your communication with your customer—or not communicating at all—makes it more difficult to clarify issues around outstanding bills quickly.

Customer-related causes

• Liquidity bottlenecks: Financial difficulties can force customers to pay their invoices late or not at all. Businesses experiencing shortages in liquidity frequently prioritize their regular costs and payables owed to key suppliers.

• Administrative shortcomings: If your customer has inefficient internal processes (e.g., in accounts), this can slow down their processing of your invoices.

• Discrepancies or complaints: Often, customers will initially withhold payments if they still have questions about the work performed or the invoice.

Payment terms, due dates, and late payments under German law

For businesses in Germany, the foundation of an effective AR management system is solid awareness and consistent application of the relevant statutory regulations. The most important provisions regarding payment terms, due dates, and late payments are set out in the German Civil Code (BGB).

Payment terms

Payment terms refers to all contractually agreed terms and conditions governing how, when, and in what way payment is to be made, the most important being the time of payment, the amount of remuneration, the currency, and the payment method. According to Section 145 et seqq. of the BGB, these conditions are established within a contractual relationship through offer and acceptance, and they are frequently detailed in a business’s Terms of Service (ToS).

According to Section 305 et seqq. of the BGB, ToS are, in principle, valid if clear reference is made to them before the conclusion of a contract. Deviating from these ToS is permitted only if both contract parties explicitly agree. In the B2B sector, ToS are used to establish standardized rules for payment terms and to document these terms and conditions in compliance with the law. Businesses are also obligated to set out all key cost components clearly and comprehensibly to guarantee transparency and compliance.

Due dates

Regarding time of payment, several models have become established. Key among them are prepayment, payment on delivery, or agreeing to a future date for payment. If no time is agreed upon, then the account is due immediately. In practice, however, payment terms are often set at 14 or 30 days.

Businesses sometimes offer discounts or other price incentives to settle an invoice early to encourage debtors to pay faster. Another option is to arrange installments so the account is settled as multiple partial sums paid across a fixed period.

Late payments

A payment is considered late when a sum that is owed is not paid on time. The legal prerequisites for a late payment are governed by Section 286 of the BGB. In principle, a payment is considered late if the debtor doesn’t pay after receiving a dunning letter. However, dunning is not required to trigger a late payment if a fixed calendar date has passed without payment. Payments are also considered late no later than 30 days after their due date and receipt of invoice. Private individuals fall under this regulation only if the consequence of nonpayment was explicitly noted on the invoice.

Businesses can charge customers additional costs if their payment is late, including late payment interest according to Section 288 of the BGB, which offsets the economic impact of the late payment on the business. It is also standard practice to charge dunning fees to cover the business’s costs for address tracing, chargebacks, and sending and processing dunning letters. Under certain circumstances, businesses can also claim for damages (e.g., if they have incurred financial loss as a result of the late payment).

What’s the difference between AR management, dunning, and payment collection?

To ensure an effective approach to outstanding receivables, it’s important to understand the differences and overlaps between AR management, dunning, and payment collection.

AR management as a global process

AR management includes all activities undertaken to systematically monitor, manage, and collect outstanding receivables. It starts before you sign a contract (e.g., running credit checks and agreeing on clear payment terms) and ends only once your invoice has been settled in full. Consequently, AR management includes preventive actions as well as management and organizational activities.

Dunning as internal debt enforcement

Dunning is a subactivity within AR management triggered when invoices become past due. It encompasses every step in making a structured demand for payment, starting with the initial payment reminder. Businesses use dunning to react to outstanding payments systematically and set clear deadlines to get paid faster. A professionally organized dunning workflow plays a key role in collecting receivables without taking legal action.

Payment collection as the final stage of debt enforcement

If payment is still not made despite dunning and further attempts to contact the debtor, then businesses in Germany can move to the final stage of escalation—payment collection. This usually entails handing over the outstanding receivable to a debt collection agency that will contact the debtor in writing and set a final date for payment. This final demand is usually enough to make the debtor pay.

If the debtor still does not pay, the debt collection agency can offer alternative solutions such as installments, or it can prepare to take legal action, such as bringing summary proceedings for a payment order.

In some cases, factoring is another option. Factoring involves a business transferring its receivable to a bank, financial services provider, or specialized factoring business, and the business then receives the invoice total immediately, less a commission.

How can automation help you reduce your outstanding receivables?

Digitization is fundamentally changing the way AR management works. Automated systems help businesses identify outstanding receivables faster and chase them more consistently. This reduces DSO and mitigates liquidity risks early without increasing your manual workload.

Monitoring incoming payments

Digital solutions let you generate and send invoices automatically. They also monitor incoming payments continuously in real time. This helps you identify missed payment deadlines or outstanding payments early so you can take appropriate action without delay.

Automated dunning

Digital solutions can trigger dunning automatically as soon as defined payment deadlines elapse, sending out payment reminders and dunning letters at defined intervals with no need for manual intervention. This automation ensures that outstanding receivables are chased consistently and that the dunning process runs smoothly and efficiently.

Better transparency and control

Digital systems collect all data on outstanding receivables in one central overview, giving you an up-to-date snapshot of payment statuses and due dates at any time. This transparency lets you prioritize specific accounts and helps you make quick AR management decisions backed by data.

Efficient integration and fewer errors

Most modern solutions can integrate into your accounting or enterprise resource planning (ERP) systems, transferring data automatically to avoid manual double entries. This reduces your administrative workload, improves data quality, and minimizes the potential for errors in the whole process.

Legal limits regarding AR management

When enforcing your outstanding receivables, you must be structured in your approach and comply with the law. Dunning and further escalation is subject to clear statutory limits in Germany that are intended to protect debtors against arbitrary or inappropriate AR management activities.

Lawful dunning

Though there are no formal requirements regarding payment reminders, dunning letters must be formulated in such a way that the demand for payment is obvious and legally enforceable. A dunning letter should be clearly labeled as such, refer to the original invoice, and state that the debtor’s payment is late.

The original date and a new date for payment should be indicated to set a clear deadline. If any additional costs are incurred, you must indicate these clearly. Finally, you must give an overview of the total outstanding receivable so the recipient can see quickly how much they owe.

Appropriate dunning fees and late payment interest

Businesses in Germany cannot charge dunning fees and late-payment interest arbitrarily. Dunning fees must align with the expenditure incurred. For example, you can claim for postage or costs for chargebacks but not for general staff and administrative expenses. When doing business with other businesses or public-sector clients, you are permitted to invoice a flat fee of €40 once a payment is late.

Late payment interest is subject to statutory regulations and is calculated according to the base rate set by the Deutsche Bundesbank, Germany’s central bank, twice a year in accordance with Section 247 of the BGB. Since January 1, 2026, the base rate has been 1.27%. Transactions with customers are subject to late payment interest of 5 points above the base rate (i.e., 6.27% p.a.). Transactions between businesses are subject to late payment interest of 9 points above the base rate (i.e., 10.27% p.a.).

Data protection and handling debtor data

As part of their AR management, businesses process personally identifiable information, such as contact details, payment information, or contract details. They are obligated to process this information in strict compliance with the requirements of the General Data Protection Regulation (GDPR). Data can be used only for clearly defined purposes and must be protected against unauthorized access.

Data can be passed on to debt collection agencies, provided this is necessary to enforce the debt and the data subjects have been informed. However, businesses must also observe the principle of data minimization: they must transmit only information that is necessary for the respective purpose.

How debtors can contest claims

If a debtor doesn’t pay despite multiple dunning letters, you can initiate summary proceedings for a payment order to legally enforce your outstanding receivable. Applications must be filed with the relevant court, which will review the case and issue a payment order where applicable. Once the payment order has been served, the debtor can settle their debt or file an objection within two weeks.

If the debtor files an objection within this period, then the case might become a regular lawsuit before the relevant court, where the debt must be reviewed and substantiated in detail. If the debtor does not pay their debt or file an objection, you can file for an enforcement order with the court. This order then serves as a basis for compulsory enforcement measures.

How Stripe Billing can help you with your AR management

Businesses looking to improve their AR management are increasingly turning to automated solutions. Stripe Billing provides support by automating billing and payment processes and giving you real-time payment status tracking, helping you identify outstanding debts faster, and giving you more structure in your AR management.

With flexible billing models, including recurring, usage-based, or individually arranged payments, you can flex your invoicing to suit different business models and your customers’ needs. At the same time, Stripe gives you access to more than 100 local payment methods and more than 130 currencies, reducing barriers to payment and increasing the likelihood of customers paying on time.

Stripe Billing also helps you reduce unintentional payment defaults. Any time a payment fails, the system attempts to collect it again automatically. With AI optimization, these Smart Retries are scheduled for times when they are most likely to succeed, increasing the probability of collecting outstanding amounts. The system also deploys automated payment reminders and dunning to reduce payment defaults without the need for you to manually chase each payment individually.

FAQs

Below, you will find answers to the most important questions about AR management in Germany.