Late Fee

[glorybound]

What are you guys charging for late fees? I have been doing 2% however, that doesn't seem an incentive to pay when the invoice is due. I don't want to do anything that wouldn't hold up in court, thievery, however, it has to create an urgency to pay. I do the work, they may lose focus on the project and it can go months when I am mostly completed with the project. How does 10% sound?

[glorybound]

From Google:

Keep It Simple. Instead of worrying about a daily finance charge percentage, keep it simple by setting a flat monthly percentage amount. For example, say all overdue invoices will be charged a 10 percent late fee. At the end of the month, multiply the amount owed by 10 percent, or 0.10

[andybot_cg]

How much of your work is repeat clients and how much is new? I think getting a beefy deposit with new clients is better than trying to chase them on the back end. With repeat clients, well, if they don't pay for a long time, then go back to bigger deposits on the next job. I don't do late fees, I just factor in that some clients are slow to pay in my proposals & deposit amounts.

You're just making more work for yourself, imo.

[cheerioboy]

Last time I got a client to pay a late fee, they stopped working with me after that dispute. But they were also hellish to work with so it wasn't so bad.

[glorybound]

I always get a 50% deposit, for both new and returning clients, and I don't release the final until it is paid in full. I automate the late fee. It is due within 15 days (they can't use it until it is paid) and after 30 days, it applies a late fee. I guess it is the principle for me and not much about the money. I am dealing with one now that wants his image, however, he says that accounting is on a 60-day payout schedule (how about reading your contract). Earlier this year I had a guy drop a 90 payout schedule, which really pissed me off and wasn't acceptable.

[joconnell]

Maybe charging more as a base rate (say 10% more than you currently do) but then offering a 10% "pay on time" discount would be a good incentive and finish the job on an extra positive note / reward good behaviour rather than souring things?

[cheerioboy]

joconnell Not sure how you'd apply the discount - would the full amount need to post to your bank on time before you give them back the discount? Otherwise you give them the discount and they take 30 days to send the check...

[glorybound]

Last time I got a client to pay a late fee, they stopped working with me after that dispute. But they were also hellish to work with so it wasn't so bad.

It is all up front, in my contract, so it is nothing personal. I usually wave the late fee, but I like to have it there just in case. You can't impose a late fee if it wasn't in the agreement. I also catch the late fee before it goes out, most of the time unless the client stops returning emails. I have one guy who has not returned an email in a month and he hasn't paid his balance, so a late fee he has received. I usually let the late fee sit for a week and then offer to wave it if they pay the balance within a couple of days.

[glorybound]

Maybe charging more as a base rate (say 10% more than you currently do) but then offering a 10% "pay on time" discount would be a good incentive and finish the job on an extra positive note / reward good behaviour rather than souring things?

The services I use don't give me an incentive to pay. If I don't pay I can no longer use their services. If you eat the steak you have to pay for the steak. I am just trying to keep it professional, which I think my clients appreciate. Having said that, I have agreed to 30-60 day pay outs, but it was my decision to agree; I don't like it when they try to sneak it in. I have not had watermarks on proofs so they can show it to their clients, but again, it is agreed on beforehand. Clients that I have had for awhile, which I call blue chip clients, don't get watermarks and I always wave the late fees. I apologize if one falls through the crack (if I don't catch it and remove it before it goes out) and I remove it.

[andybot_cg]

Sounds like the late fee is already kinda arbitrary. What do you gain by having it automated like that?

[glorybound]

Sounds like the late fee is already kinda arbitrary. What do you gain by having it automated like that?

Because if I need it, it is there. I don't know someone will vanish until they do and I want to be protected, I can't add it after the fact. I use it as leverage to get paid by offering to remove it if they pay within days. If they continue to ignore me then it'll accrue and I'll file against them. This has happened twice this year and twice they paid when they got served. I know some walk away, but that is what is fueling people doing it. Heck, if they didn't pay the balance the last few projects why would the next guy not walk away? Some go in knowing they'll only be paying 1/2.

[glorybound]

It's like when you order something online and the shipping date is in two weeks, and you get it days early. Under promise and over deliver. I would rather have a late fee applied and forgiven than not having it there just in case. I think my logic is solid, I am just trying to figure out an honest and fair percentage.

[squintnic]

good luck getting paid a late fee lol, especially if you want to retain the client in any way shape or form
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[glorybound]

I don't understand that logic. Why would you want to work with someone who doesn't appreciate your value and pay you what is owed? If I am pre-qualifying someone and I ask the question, "will you pay me on time?" and they say "no!", why would the conversation go any further? So, you'll walk away from what is owed and work for them again? Heck, my snow plow guy charges me a late fee when I don't pay him on time. Why? So I pay him on time next time. Why do I want to pay on time? so when it snows next time, he doesn't push me to the end of his route.

[glorybound]

Sounds like the late fee is already kinda arbitrary. What do you gain by having it automated like that?

I would like it not to go out by dafult, but it does. I have also requested my invoices not go out on Sunday’s, but again, I don’t have that control. When my people except the quote they automatically get sent a contract and when that is signed, they automatically get the deposit invoice. When the due date has passed they automatically get the final invoice and they get reminders, I think every week. If they don’t pay within 45 days they get a late fee and it is all automated. I can turn the automation off, but then I have to manage all that crap. I can’t tell you how many project I did last year (well, I can if Ilooked), but I would be spending 1/2 my time with accounting if I didn’t automate as much as I can.