These plans provide payment flexibility, allowing you to tailor payments to your customer needs. These payment plans should outline the minimum amount together with interest charges. You could even use a payment plan.Ī payment plan allows your clients to pay off past-due invoices over time according to a specific payment schedule. Evaluate each situation, don’t impose the same late payment policy on everyone, and see if you can find another way to deal with those unpaid invoices.įor instance, instead of charging a late fee, you could offer a payment extension to extend the payment terms from 30 to 60 days. In other cases, there may be unforeseen circumstances where a lucrative and usually reliable client can’t pay you on time. For example, a client may be going through a personal challenge-like dealing with bereavement or an unexpected illness. Just because you have a late fee policy doesn’t mean you have to enforce it on every occasion. Know When Forgiveness Is the Better Choice This way, they can’t act ignorant and can expect all future unpaid invoices to increase in value after a pre-determined amount of time.Īnd if the client responds asking for justification, you can say that you enforce this late payment policy with all new clients. Just inform the client in advance, stating that you will have a late payment policy next month. You can still include late fees if you have not specified the above. Just as you would be frustrated to encounter surprise late fees buried deep in the terms and conditions, so would your clients. Make sure it’s visible-don’t hide it in the fine print. Including the late charge on all invoices you send and specifying whether it’s a flat fee or a percentage of the invoice amount.And remember: When done in a positive, friendly way, your clients will understand late fees are nothing personal-but something small business owners need to include for protection. Specifying the late fee early in the relationship, in writing, ideally through a contract.Don’t include late payment fees if clients aren’t expecting any. Nothing burns bridges faster than surprise late charges. Make Sure Clients Are Aware of the Late Fee You can now send your invoice and include payment terms, so there are no surprise late fees. If it did, the client is most likely satisfied. That’s why you must double-check that the work fulfilled the estimate before you invoice. Including a late payment fee in an invoice may only aggravate the problem. Instead of making a fuss, they vent their anger by not paying you on time. But then there are those who aren’t happy with your service. Others, still, won’t pay because they don’t have the money. Some won’t pay you because, well, they’re bad clients. Confirm if the Work Fulfills the EstimateĮvery client is different. Guidelines for Charging a Late Payment Feeīy following the below guidelines, you’ll better understand when it’s suitable to charge these late fees. While in principle late payment fees work, there are instances when they’re not a good idea. But if you have stricter late payment policies and kick up a fuss, they’ll move your payment to the top of the pile. You Get Paid Before Other Contractors DoĬhances are that if clients aren’t paying you by the payment date, they’re doing the same to other contractors. If you don’t include a late fee policy, the perception may be that a client who doesn’t pay you by the due date can repeat this behavior. It Establishes You as a Serious Professional Who Has a Business to Run While ideally, you could avoid such measures, the mere idea of late payment fees might motivate clients to pay you as soon as they can or at least communicate with you if they’re unable to. One way to keep cash flowing is by charging a late payment fee as an added incentive to get clients to pay up sooner. You Need the Money-ASAPĬash flow is an absolute necessity to cover your daily business expenses. Why Charging Late Payment Fees Can Be a Good Ideaīesides encouraging clients to pay, an overdue payment fee is a good idea for other reasons: 1.
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