Meanings of Claims
When a claim is spoken of, then what is meant is a creditor’s claim to a performance by the debtor. This can be a cash benefit or another benefit.
A claim by an entrepreneur (creditor) is a claim against his supplier or customer (debtor) in the form of money, services or goods. The opposite of the requirement is the obligation.
The characteristics of claims
Accounts receivable primarily consist of financial claims, for example from a delivery of goods. However, if the consideration is not provided immediately, for example the amount is not paid cash on delivery, then there is a claim.
The company Weise & Weise delivered goods worth 30,000 euros to Mueller & Co. on July 1st, 2016. But Mueller & Co. will not settle the bill until July 20th, and Weise & Weise has a claim against Mueller & Co. up to this point.
The claims on the balance sheet
According to HOWSMB.COM, the receivables are posted and managed in the balance sheet on the assets side under the item current assets as “Receivables and other assets”. According to Section 266 of the German Commercial Code (HGB), they are divided into the following components:
- Accounts receivable from deliveries and services: If a claim arises from a delivery or several deliveries or services against the customer, then this is referred to as a receivable from deliveries and services.
- Receivables from affiliated companies: These receivables arise from business relationships between parent companies and subsidiaries.
- The claims against companies in which there is a participation relationship: These are claims from claims against companies against which the company concerned holds shares, for example as the general partner of a GmbH.
- Other assets: This item includes all assets that do not fall under one of the other three previous claims. This can include, for example, claims against the tax office, deposits or advances to employees.
The valuation of claims
All trade accounts receivable must be valued at the end of the financial year. This is done according to the so-called creditworthiness principle, according to the following categories:
- The impeccable demands
These are claims that are expected to be received in full. Therefore, these receivables must be stated with the total gross amount (nominal amount).
- The dubious claims
In the case of these claims, it is uncertain whether the payment will be received at the end of the year. For example, the debtor may have become insolvent or fail to pay the amount despite several reminders. These receivables are then posted to a separate “Doubtful Receivables” account so that a better overview is created.
- The bad debts
If at the end of the year it can be expected that the claim will no longer be settled, then it is considered an uncollectible claim. A failed foreclosure can be cited as an example. These receivables can be written off in full and then, as part of a sales tax correction, the sales tax can also be reclaimed from the tax office.
The deferral of a claim
A deferral is an agreement between the two contracting parties, with which the due date of the claim is postponed beyond its due date. Despite the deferral, the debtor remains entitled to meet the claim early. Admittedly, the deferral of claims is not standardized by law, but the legislature has clearly regulated the consequences in the law.
In accordance with Section 205 of the German Civil Code (BGB), the limitation period for the claim is suspended, and this means that the limitation period does not begin to run. The deferral is an objection in the legal sense. The verbal agreement between the creditor and the debtor is sufficient for a deferral, because there are no formal requirements stipulated by the legislator.
In the context of tax law, the deferral of claims is an administrative act and this can be granted if the collection of the claim would mean considerable hardship for the debtor and the claim is not endangered by the deferral.
When is a claim time-barred?
For an entrepreneur, a payment default can quickly mean ruin and therefore every effort should be made to assert the claim in good time. However, since the shortened limitation periods in force in 2001, entrepreneurs have had to react quickly. A decisive sentence is set out in Section 214 (1) of the German Civil Code (BGB), and it applies here that a claim no longer has to be paid after the statute of limitations has expired. In plain language, that means that the entrepreneur can continue to demand his outstanding invoice from the customer. But the latter can enforce the statute of limitations via the objection and that means that in this case he no longer has to pay and the entrepreneur can no longer enforce his claim, which still exists, in court. There is only one thing left here: hope!