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Late fees, again I know!

Discussion in 'Business Fundamentals' started by got-h2o, Mar 7, 2009.

  1. got-h2o

    got-h2o 2000 Club Member
    Messages: 2,439

    Please bear with me, and thanks in advance for any responses. I've read through the threads, I've done my searching. Although there are some on the subject, none really tackle my issue at hand. I've been in business for 6 years and have my proposals/contracts/invoices worded quite legally and professionally. I'm not one to scurry from a thread when a question is asked about bidding a job or how to do it, or how to invoice, etc... That being said, here goes.

    I sub for a new local contractor. Although he thinks he is big business, he is not. He does not handle any of the elements of business properly IMHO. I've invoiced him in the amounts of $11.5k, $10k, etc...(plow only, no salt). Originally I feared not getting paid, but then realized he's just slow, and has no clue on the proper or even professional ways of handling business. He budgets poorly, spends money he doesn't need to (half of it up his nose IMHO), then waits until the following month's payment to pay us subs. Not 100%my concern how he spends his $, but when most of it's mine, I take it personally. I have first hand knowledge of him spending $5k, $12k, and $4k while claiming he has no $$ to pay me. We took over the 1 lot in question and my company handles it soley. He owes me for that, let alone $$. There were 3-4 times this year that I called him for salt at 7am or so and he was unaware that it even snowed. I can talk for hours, but back to business. Legal or not, my invoices state :

    "All payments will be made as noted or will be made within 30 days of billing or a 20% late charge to unpaid balance will be incurred. Accounts overdue will be turned to collection and above party will be responsible for all collection and attorney fees."

    Use the above in your invoices all you want.

    20% on $10k plus is $2k. All states vary, and I know "legal" is 1.5% a month here, basically 18% over the year. My question is this.........Say he finally paid up after 2.5 months of us completing the job, 45 days after he was invoiced and allowed 30, can I legally collect the past due amount of $2k (or $1,800@18%)? I've never had a problem like this in the past. It's either they've paid on time or they actually pay the 20% late charge, really.

    Is it legal to collect the entire past due amount, just stretching it out over 12 months, or is the 1.5% for that 1 month all I can get, legally?

    Again, I don't mean to sound ignorant to business, it's just that I've never had this happen. I've been lucky I suppose. As a sub plowing for others, I usually fax our hours over and have a check in a couple of days. It's not as if it's my account and I'm waiting on them to pay, which is how he's treating it. If it was, I'd handle it how I see fit, breaking it down in a contract. My guys were paid on time for doing their job (by me)........I was not. It's costing me to wait for my money in more ways than one.....again, I can talk why for hours.

    Believe it or not, he paid in cash and has no way to prove he did, he is supposed to cut a receipt for me to sign but hasn't yet. The ball is in my court if I wanted to screw him, which I would never do. I was raised better than that. I know it's probably in my best interest to take the $$ and be happy, but he's done me wrong in a few different ways, and if I can legally collect the amount past due, I feel that I've earned it.

    Thanks again for everyones time,

  2. Dustball

    Dustball Senior Member
    Messages: 274

    You can only collect the amount of late fees based on the amount of time that is past due.

    18% is 1.5% per month so on $10,000- that's $150 per month you can go after. If he was two months late then it's 2x$150= $300.
  3. downtoearthnh

    downtoearthnh Senior Member
    Messages: 121

    Doesn't seem like the real issue here is business. You have gotten yourself into a situation that seems to have a recurring issue.... Coming back for more and then expecting to be dealt with professionally is a little naive. I would be happy with payment for the actual amounts, and if possible find another site on which to subcontract next year. The energy, cost, and frustration to collect money over the cost of your payment is probably not worth it!
  4. got-h2o

    got-h2o 2000 Club Member
    Messages: 2,439

    I was afraid of that, but expected it. ;)

    It was only 2 months of work. I pulled off when I saw the problem starting, got paid, then began plowing again, until it happened again. I never have and never will expect to be dealt with professionally from this guy............5 minutes with him and you'd see why. I don't plan on doing business with him any more. I am happy with finally receiving payment. I'm cutting ties and wanted to teach him a lesson. Again, he's stuck it to me more ways than 1, ways I havent mentioned, more than just paying a little late.

    It's obviuosly a lot of money, so you have to understand why I kept coming back for more. Even taking a chance, it was still worth it. Infact, I put additional trucks on b/c of the opportunity. Not nieve at all b/c this guy is very easy to read. I always had the upper hand when it came to doing the work. He has a job that has him out of town often(daily). He knew that at the drop of a hat, he'd lose a VERY important account if I didn't show. He was screwed without me. He was on the verge of losing the account until I came along. I've done a lot of things for him, so feel that I've earned my 20%, I guess it would be better understood if I just gave details to begin with. I know what he made to do nothing, and again, 5 minutes with him and you'd realize why he doesn't deserve it.
  5. sparky8370

    sparky8370 Senior Member
    Messages: 234

    So cut ties with him and steal the account. After you take the account, send him another bill for the late payments just to rub it in.
  6. got-h2o

    got-h2o 2000 Club Member
    Messages: 2,439

    No comment :rolleyes:
  7. sparky8370

    sparky8370 Senior Member
    Messages: 234

  8. BigDave12768

    BigDave12768 PlowSite.com Addict
    Messages: 1,446

    Wow you took Cash!!!!! I would never take cash
  9. cretebaby

    cretebaby PlowSite Veteran
    Messages: 4,162

    Who's trolling? :confused:
  10. BigDave12768

    BigDave12768 PlowSite.com Addict
    Messages: 1,446

    You are. why you asking:confused:
  11. Ipushsnow

    Ipushsnow Senior Member
    Messages: 314

    I was reading your post thinking one thing, then when I saw he paid you cash it kinda made me do a turn around.

    As for the late fees I think 20% if over 30 days is kind of steep, but that's your call. And I love the way the customers ignore late fees and just send what they owe for plowing. This is the way I have done it: Customer owes $100 and I charge a $5 late fee. Customer sends me a check for $100, I credit the late fee as being paid, but they still have a $5 balance on the plowing. So if we plow one more time the next invoice will be for $100, plus $5 balance from previous invoice so total invoice is $105. And I keep doing that and adding it up and adding it up and then late fees start adding up on their past due balances and they realize you aren't going to just forget about it and they pay it all. It's also a good bargaining chip for a customer that is a real shite bag, "Look, pay me what you owe me now, and I will waive the late fees." This works well.

    As far as cash. I never pay ANYONE in cash, but am always more than happy to get paid in cash. I have customers ask me all the time "How much will you take off if we pay cash?" The thing is you really have to watch what you do with that cash. Having been through the lovely process known as an audit I can tell you first hand. First thing, do not deposit that cash anywhere, not in your personal account for sure. And don't pay any business expenses with that cash either. That cash is your grocery money for awhile, or pay your home utilities in cash, your walking around money, etc. If you have that customer entered in your quickbooks take them out, that transaction never happened.

    But you also have to watch your ratios. Here is good story: A buddy of mine owns a laundromat, a totally cash business. He was taking about 50% off the top and claiming the other half. All good, no way the IRS can prove how much he was taking in right? WRONG. So he gets audited. Of course he claims his water bill because that is a major expense of operating a laundromat. So the agent asks him what model of washing machines he uses and he tell him. The auditor looks up how many gallons of water that model uses per wash, say 10 gallons, the water bill shows he used a million gallons of water, so the agent assumes he had 100,000 wash cycles at $2.00 each so he should have $200,000 in income, and then another $100,000 in dryer use, so he should have $300,000 in income. But he is only showing $150,000. He gets a tax bill for the other $150,000 plus penalties and interest.
    For me, I do construction in the summer and I know their ratio is 2 to 1. So if I buy $200,000 in materials I better have $400,000 or close to it coming in. Showing $200,000 in materials purchased and only $225,000 coming in is not going to cut it.

    The other thing is another business probably wont pay you cash because they want to write off what they pay you. If, like in this case the guy pays you cash, plan on getting a 1099, if not, great, but plan on claiming that money until you know for sure.
  12. got-h2o

    got-h2o 2000 Club Member
    Messages: 2,439

    Thanks for the great post ipushsnow! Just a little side note, I really don't know why he paid in cash. As I said before, he's VERY unprofessional. I think he thinks he's doing everyone a favor by doing so, but still plans to claim it. The first payment he gave me a receipt and had me sign the invoice as paid in full. He plans to do the same for this one I'd assume. At least he's smart enough to do that, but then again......what's the point of cash then.

    He goes around like some hotshot with a bank pouch breaking at the seams. The wrong person's going to see that one of these days. As stupid as it sounds, I think he's just trying to be cool.