Payment delays or an unexpected customer default?

Table of contents

What happens in the event of late payment?

If there is a delay in payment, default interest and compensation for damages caused by delay play a central role. Special statutory regulations apply to entrepreneurs.

As soon as a debtor is in default of payment, the creditor is entitled to statutory default interest:

For legal transactions with consumers (or consumer transactions (B2C)), the statutory default interest rate pursuant to Section 1000 (1) ABGB is 4% per annum, irrespective of the base interest rate. For transactions between entrepreneurs (or business-to-business transactions (B2B)), a significantly higher interest rate applies in accordance with Section 456 UGB: 9.2 percentage points above the prime rate of the Austrian National Bank (OeNB). This prime rate is regularly adjusted and can be viewed on the OeNB website.

In addition to the statutory default interest, the creditor is entitled to compensation for so-called default damages in the event of late payment. This includes the costs of reminders - but only if it is not the first notice of default. Furthermore, necessary and appropriate collection expenses can be claimed, provided these are in reasonable proportion to the claim. The costs of instructing a lawyer for extrajudicial or judicial debt collection can also be claimed as damage caused by default. In commercial business transactions (B2B), the creditor is also entitled to a statutory lump sum for default amounting to EUR 40 in accordance with Section 458 of the Austrian Commercial Code (UGB) - regardless of whether damage in this amount has actually been incurred.

Regardless of the specific legal situation, a delay in payment can put a company in a difficult situation in which it can no longer settle invoices itself. The default of one company creates a domino effect that can threaten the existence of several companies.

Dealing with late payment by a business partner

If you wait in vain for payment from a business partner, you can take the formal route of a reminder to legally secure your claim. If your reminders are unsuccessful - up to three reminders are common, although not required by law - in Austria you can use the judicial dunning procedure ("payment order") or file a lawsuit with the district or regional court.

However, particularly in the case of long-standing or economically significant business relationships, it is advisable to seek a direct discussion with the debtor before taking legal action. An amicable solution, such as payment in installments or a new payment plan, can not only preserve the business relationship, but also save time and money.

Regardless of your relationship with your business partner, you should keep an eye on your own liquidity. After all, late payments can quickly become a threat to your own solvency. In such cases, it can make sense to examine short-term financing options - for example, working capital loans or alternative forms of financing such as factoring or pledged loans.

Your options if a business partner defaults on payment:

1. Send a reminder and take legal action in the event of persistent refusal to pay.
2. If the business relationship is good, seek personal contact and agree an installment payment or deferment of payment.
3. Bridge the resulting liquidity gap, e.g. through short-term financing or operating reserves.

Bridging non-payment / late payment by the customer

If a customer's non-payment threatens to become a problem, you should think about financing the payment gap as quickly as possible. Pfando offers the ideal solution in such a situation, namely short-term liquidity in an unbureaucratic manner - without the need for KSV, guarantors or proof of income.

If you own a car, truck, van, classic car, company car or agricultural equipment such as a tractor, you have excellent conditions to benefit from our Cash & Drive principle! After professional advice and an appraisal, we will provide you with a free and non-binding offer for a pawn loan with the maximum possible payout amount - and best of all: you can receive cash immediately and don't have to hand in the keys to the vehicle! So you can get on with your work without any worries and stay mobile!

Is late payment time-barred?

An outstanding claim in connection with a default in payment may become time-barred in Austria. The limitation period does not apply to the default itself, but to the payment claim that has become due as a result of the default.

In principle, the regular limitation period pursuant to Section 1486 ABGB is three years. This period begins at the time at which the claim can be asserted in court for the first time - i.e. usually from the due date of the claim, regardless of whether the debtor is in default. The decisive factor is always the date on which the payment is objectively due.

Under certain circumstances, the limitation period can be interrupted or suspended. Such an interruption occurs, for example, if

• the debtor makes a partial payment,
• the debtor expressly acknowledges the claim (e.g. by requesting a deferral of payment), or
• legal proceedings are initiated - for example by a court order for payment or a lawsuit.

If the claim is confirmed by a final judgment or an enforceable execution title, the limitation period is extended to 30 years in accordance with Section 1489 ABGB. Within this period, the claim can be enforced at any time by compulsory enforcement (execution).

Late payment for companies or businesses

If you fall into arrears as an entrepreneur, you need to act quickly. This will not only help you avoid unnecessary interest on arrears, but may also result in a negative KSV entry, which can have a lasting negative impact on your credit rating. It is best to contact your creditor at an early stage and try to agree a partial payment, installment agreement or settlement of the default interest incurred.

If you need short-term financial liquidity, you can turn to Pfando with confidence at any time. Simply bring your company car or another vehicle that you own with you - and benefit from the proven Cash & Drive principle: you receive immediate cash as a pawn loan, but remain mobile.

Late payment to the tax office

If you are confronted with an unexpected additional payment when you receive your tax assessment notice, you can quickly fall into arrears if you have no financial reserves. However, such a delay in payment to the tax office should not be taken lightly: If you are unable to pay the tax claim on time, you may face late payment penalties and possibly a late payment surcharge.

If a reminder has already been issued by the tax office, you generally only have a grace period of seven days to pay the outstanding amount (§ 230 BAO). If this deadline is not met, the tax office can initiate automatic execution (garnishment) without further notice.

The advance VAT return (UVA) is particularly important in this context: As an entrepreneur, you are obliged to submit this monthly or quarterly on time. If the UVA is submitted late or not at all, there is a risk of

• Estimates of the tax base by the tax office (§ 184 BAO),
• Late payment surcharges (§ 135 BAO),
• Late payment surcharges for late payment (§ 217 BAO),
• and, in extreme cases, suspicion of tax evasion (§ 33 FinStrG).

The following therefore applies: Submit your UVA on time - and if you have payment difficulties, contact the tax office in good time to apply for payment in installments or payment relief. Failure to do so can quickly turn a payment problem into a criminal risk.

Late payment of wages

Late payment of wages puts the employee concerned in a very unpleasant situation through no fault of their own, which can have far-reaching consequences. Firstly, if wages are not paid, there is the threat of rent arrears. Rent arrears can lead to termination without notice after a short period of time - namely if more than one month's rent is outstanding for a period of more than 8 days (Section 1118 ABGB). On the other hand, an employee can stop working after a short period of salary arrears - sometimes after one month - or terminate the employment relationship without notice for good cause (Section 25 AngG).

As a businessman, you should therefore avoid this case at all costs. If you have an acute financial hole in your business coffers, you can finance the continued payment of wages in the short term by turning your vehicle fleet into cash with Pfando - and still continue to use it!

Delayed payment of the insurance

Depending on the importance of the insurance in question, it is important to carefully weigh up whether a temporary loss of insurance cover can be accepted. A delay in payment can have serious consequences, particularly in the case of insurance policies that are important to your business, such as liability insurance or property insurance for stock (e.g. glass breakage, fire or burglary insurance): If the contract is terminated or the insurance cover is suspended, your company will be left with the costs in the event of a claim - sometimes to an extent that could threaten its existence.

In such cases, it may make sense to think about a short-term financing option - even if this is associated with costs. This is because the impending loss of insurance cover can be significantly more expensive than the financing fee in an emergency.

With Pfando , you can quickly and easily become liquid again: Bring a vehicle from your business assets and benefit from the Cash & Drive principle - you receive cash immediately and still remain mobile. This allows you to secure important payments such as insurance premiums and avoid the loss of essential services.

Late payment for private individuals

There are also many areas of everyday life in which private individuals may fall into arrears.

Late payment of rent

According to Austrian tenancy law, rent must be paid in advance, usually by the fifth working day of the month. If payment is not made on time, the tenant is in rent arrears.

Even the absence of one month's rent for a period of more than eight days can give the landlord the right to terminate the tenancy agreement extraordinarily and without notice in accordance with Section 1118 ABGB. Ordinary termination due to late payment is also possible as soon as there is a relevant arrears - for example in the event of repeated or persistent non-punctuality.

You should avoid this situation at all costs. Because a termination without notice can mean that you lose your apartment quickly - in the worst case within a few weeks. If you find yourself without a home from one day to the next, you are not only faced with organizational problems, but often also existential ones.

Late payment on a cell phone contract

Nowadays, it's hard to imagine everyday life without a cell phone or smartphone - both professionally and privately. But if you have high monthly costs or don't use an automatic payment method such as SEPA direct debit, it's easy to overlook a mobile phone bill. If payment is late, there are serious consequences.

According to the Telecommunications Act (TKG 2021), a provider is generally entitled to block a telephone number if the customer is at least EUR 50 (incl. VAT) in arrears and has been informed of the block in writing beforehand (Section 133 TKG 2021). Only when this notification has been made and no payment has been received may the block actually be implemented.

A block is not permitted for smaller arrears. Nevertheless, the following applies: you should pay an outstanding mobile phone bill promptly to avoid not only a block but also further reminder fees or collection costs. After all, a small payment arrears can quickly turn into a major financial burden.

Default of payment by the employer

If your employer is in arrears with wages or the company is already insolvent, you should act quickly. Short-term financial bridging - for example with the help of Pfando - can help you to survive the critical transition period until you find a new job.

In the event of insolvency, you must expect that there will be other creditors and that your outstanding salaries will not be covered or only partially covered. In Austria, however, it is possible to apply to the Insolvency Remuneration Fund (IEF) to have outstanding wages reimbursed - you should initiate this quickly.

If wages are not paid over a longer period of time (usually just one month in arrears is enough), you have the right under § 25 AngG to stop working and terminate the employment relationship without notice, without incurring any disadvantages in terms of unemployment benefit. It is important that you announce this step in writing and immediately register as unemployed with the AMS (Public Employment Service) in order to secure your entitlements.

If you find yourself in an acute financial emergency, you can easily fall back on the Pfando credit alternative: Bring a vehicle in your ownership and receive cash within 60 minutes - while you can continue to use your car. This gives you financial freedom of action without having to rely on bureaucratic hurdles or long waiting times.