Late payments can seriously impact your cashflow, so using late fees does seem like a good idea to help with this. Legally, as soon as a payment is late you can charge your client a late fee and interest*.
But there are both pros and cons to using them; let’s take a look at what they are:
You’ll get paid on time
Clients don’t want to be facing extra charges so if they know you use late fees it can encourage them to pay on time. That way they never have to pay the extra.
You’re covered for the time spent chasing payments
Chasing clients for late payments can be really time consuming,and that’s time that you are not spending on other projects. Late fees can cover, or at least contribute towards that time, so you don’t end up out of pocket.
You might also like: Chasing unpaid invoices
You could burn bridges
Some people could take offence at being charged late fees and you could end up losing them as clients. (Of course do you really want to work with someone who doesn’t pay on time?)
It might not be worth the effort
If the late payment was for a small amount, the late fee and interest will likely be small as well. In this situation, if the client has (finally) paid their bill but not the late fee, the extra amount you’re chasing them for may be so small that it is not necessarily worth spending more time chasing the payment.
Over to you
What do you think – do you use late fees and if so how do you enforce them ?
*Disclaimer: Laws vary depending on your location, so please check on the legislation where you are. If in doubt, it’s a good idea to consult a solicitor.
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