The Lettre de Change Relevé, better known by its acronym LCR, is a term frequently used in the banking and financial sector in France. However, for many, it is a vague, even incomprehensible concept. The aim of this article is to help you understand clearly and precisely what a Bill of Exchange (LCR) is, how it works, and how it could be beneficial to you.

What is the Bill of Exchange (LCR)?

The Bill of Exchange is a means of payment that allows companies to obtain settlements from their customers through banks. A Lettre de Change Relevé (LCR) is a standardized and digital version of the classic paper-format bill of exchange. The bill of exchange was designed to facilitate the management of commercial transactions. It is a document indicating that a certain amount of money must be paid on a certain date. It is a credit instrument signed by a debtor (the drawer) who undertakes to pay a certain amount of money to a beneficiary (the drawee).

How the Bill of Exchange works

Understanding how the LCR works is essential to making the most of it. The LCR is essentially a deferred payment method. It is reserved for commercial transactions between professionals or companies, and the conditions for its use are specified in Article L313-13 of the French Consumer Code. A bill of exchange is issued by the creditor and accepted by the debtor, who thus undertakes to pay the amount due on a specific date. Once that date arrives, the creditor's bank withdraws the amount due from the debtor's account. For the LCR, the creditor sends to its bank a file standardized by the French Committee for Banking Organization and Standardization (CFONB), unlike the classic paper-format bill of exchange, where the creditor issues the document directly to its customer.

The benefits of the LCR

The LCR offers several significant benefits. First, it offers a payment guarantee. Indeed, the debtor's acceptance of the LCR constitutes a legal commitment to pay. Consequently, the creditor is assured of receiving its payment on the agreed date.

Additionally, the LCR facilitates cash flow management. As the payment date is set in advance, the creditor can plan its cash collections and manage its treasury more effectively.

Finally, the LCR makes it possible to automate cash collection management. Through automation, the collection process is simplified and less prone to errors.

The difference between the LCR and the BOR (Promissory Note)

It is important not to confuse the Bill of Exchange (LCR) with the Billet à Ordre Relevé (BOR — Promissory Note), although their principles are similar. The main difference lies in the fact that the BOR is a debt instrument issued by the debtor itself in favor of the creditor, while the LCR is a debt instrument issued by the creditor and accepted by the debtor.

How to issue a Bill of Exchange?

To issue an LCR, several pieces of information are required. These include:

  1. The name and address of the drawer (the creditor) and the drawee (the debtor).
  2. The amount to be paid, expressed in figures and in words.
  3. The date and place of issue.
  4. The maturity date, that is, the date on which payment must be made.
  5. The drawer's signature.

Once the LCR is issued, it must be accepted by the debtor. This means it must be signed to indicate that the debtor undertakes to make payment on the agreed date.

The LCR certainly presents many benefits, but it also carries risks. The main risk is default of payment by the debtor. Indeed, despite the legal commitment, the debtor may not be able or willing to pay at maturity. In this case, the creditor must initiate collection proceedings, which can be costly and time-consuming. If the bill of exchange is not honored, the holder must have this default of payment officially recorded by a notary or bailiff. The associated costs are borne by the drawee. This act serves as a pressure tool on the drawee, since the company name will be entered in a specialized file at the registry of the Trade and Companies Register (RCS). Anyone consulting this file will be informed that the drawee has not respected the obligation to pay a bill of exchange.

Conclusion

The Bill of Exchange (LCR) is a means of payment that offers a collection guarantee for the creditor and facilitates cash collection management. Understanding and using it can therefore be beneficial for any company seeking to optimize its financial management. However, it should be remembered that it is not without risks, particularly in the event of debtor default.

‍