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Thinking of putting into contract late payment fee - How?

Discussion in 'Bidding & Estimating' started by GMSNOW, Feb 5, 2009.


    GMSNOW Member
    Messages: 68

    How do you structure the late payment charge. Do you charge a percentage after so many days late or a flat fee if the payment is not received by such and such a date? I currently do not have a late payment charge. What are some examples. Do you ever have anyone turn you down or get rid of you because of this? Do you ever have a problem collecting the late charge?

  2. IMAGE

    IMAGE Sponsor
    Messages: 1,747

    Sorry I am not gonna put it word for word out here.

    But you should not have it be a "flat fee" because what is the difference to them if its 30 days late or 90 days late?

    Something like X% after the first 30 days, and x% each 30 days after. Of course you can put a minimum late fee statement in also. using the "whichever is greater" statement
  3. IMAGE

    IMAGE Sponsor
    Messages: 1,747

    oh and remember that the there is a limit to the APR it can be. Varies by state, so you gotta figure that part out too.
  4. grandview

    grandview PlowSite Fanatic
    Messages: 14,609

    Are these commercial accounts? Most of them feel they have 30 days to pay without a late fee.Most are 1.5% per month unless you state says something else. Also it's a little harder to put one on in the middle of the season so it's something to think about for next year. Or you could offer 3% discount if paid in 10 days.
  5. Rc2505

    Rc2505 PlowSite.com Addict
    Messages: 1,245

    I have a 15 day window that all invoices are due by. Then I have a statement at the end of each invoice that reads All past due balances are subject to a 2% finance charge per month. I put the word subect to in there so I can determine on a case by case basis if I feel the late charge needs to be implemented or not. Some of my bigger accounts are know for paying 30 to 45 days. I know that and already charge them accordingly, so I do not add the late fee. Now if it became a habit for them to start paying at 60 days, then I would add in the late fee so I could cover the additional expenses of carrying the balance for that long.
  6. QuadPlower

    QuadPlower PlowSite.com Addict
    Messages: 1,056

    Residentials are due upon reciept which means 1 week. After 15 days I stop providing service.

    Charge a "Late Fee of $10.00 to cover administrative costs." Now its a labor cost and not an interest charge.

    And you can't do it this year. Put it in for next season.
  7. TCLA

    TCLA 2000 Club Member
    Messages: 2,707

    Yes. Most will never pay a late fee. "Interruption of services" is more effective for past due accounts. And don't be afraid to exercise the clause.
  8. Bajak

    Bajak Senior Member
    Messages: 999

    I like GVs way better. Discount for prompt payment.
    Everyone likes a discount, no one likes late fees.
    Besides you send them a late fee they just wait another 29 days before they mail you a check.
    I wish we could be like credit card companies and charge daily interest.
  9. valpoguy

    valpoguy Member
    Messages: 49

    I handle all my companies the same, although we don't do any lawncare, plowing, etc...it should be the same. We do Net 30 , 2% 10, which means they have 30 days but if they pay within 10, they take a 2% discount...anything after 30 days is charged 1.5% , the apr varies state to state.
  10. QuadPlower

    QuadPlower PlowSite.com Addict
    Messages: 1,056

    Why would anyone reduce their income to get paid on time?

    Drive through food order.
    Can I take your order?
    bla bla bla
    That will be $10.00. But if you pay at the first window instead of the second it will only be $9.80. On the other hand if you come inside and pay it will be $10.15.
  11. grandview

    grandview PlowSite Fanatic
    Messages: 14,609

    You need to think in back office terms. How much would it cost you or a company that has office help to rebill that invoice? So on a 1,000.00 invoice they save 20.00 but you get your money right away with out worrying about when or if they pay. Also a lot of companies don't take advantage of it anyways.
  12. QuadPlower

    QuadPlower PlowSite.com Addict
    Messages: 1,056

    I get that a lot of companies don't take advantage of it so it doesn't matter.

    I am my back office staff so maybe I'm off base. But it cost about a dollar to print another invoice and mail it off. If I did have office staff, they would be paid either by the hour or salary, so I would want them doing something if I'm paying them to be there from say 9 - 5.
  13. valpoguy

    valpoguy Member
    Messages: 49

    Thats just how it is in big business, We always take our discounts, typically we spend 1 mil plus a year with suppliers...so it typically saves us 20-40k a year. We have a handful of customers who take advantage of it, and quite frankly 2% is less then I pay for my CC processing, so its already figured in our pricing.
  14. QuadPlower

    QuadPlower PlowSite.com Addict
    Messages: 1,056

    I guess I'm glad that I'm not big business so I don't have to offer a discount to get paid when the contract says I'm suppose to be paid. I show up on time, I get my checks on time. If I dont', I stop showing up.

    So if its already figured into your pricing, do you think its already figured into your suppliers pricing? So when you don't pay before the discount, they are charging you 2% more than normal. So if they give you a say 8% discount off of the purchase price, in reality they are only giving you a 6% discount.

    My suppliers offer me a contractors discount off the cost of everything. They don't offer a discount for paying prior to when the invoice says.

    So you plowers that offfer a discount to pay prior to the invoice date, do you add in the discount to your price and if they pay early you make what you want and if they pay on time you make more?
  15. yardatwork

    yardatwork Member
    Messages: 64

    I do a flat fee. Most, if not all of my clients have been with me for years. So, I have built strong relationships with these people and some I would call friends. So, I just do a little $5 per month late fee. This basically covers my time to photocopy their invoice, resend the photocopied invoice and the price of the stamp and envelope. In 11 years I've only had three people not pay their bills. Once was so minimal that it wasn't worth the hassle of taking them to court. The other two clients both had bills over $800 and I went to the Magistrate to file charges. I won both cases...however...small claims court is a joke. The one client had moved and had an out-of-state PO Box and couldn't be tracked. The other people lost and then they filed bancruptcy. I put leins on both clients that'll stick for five years. After that...they are good to go! The only people making money on a small claims court case...THE MAGISTRATE. The law protects the criminals. I could have went further with this to garnish wages. However, that would have cost me another $254.00 in processing fees. I just gave up and ate the loss...worked it into my taxes at the end of the year.
  16. Dub's Shrubs

    Dub's Shrubs Junior Member
    Messages: 3

    First thing is the whole point of late fees is to get people to pay on time so what do 2% do it's 20 on 1000 bill. I charge 18% which on 1000 is 180 that might make people think to pay there bills on time like I tell them I have bills too and I can't call ford motor and tell them that i'll pay when I get payed it don't work like that pay on time and we all fine
  17. lawnoasis

    lawnoasis Junior Member
    Messages: 8

    If there is no incentive to pay on time than some people just won't. If you provide a timely service and do a good job you should expect to be paid on time. I usually give new clients one late payment on the house. (i don't tell them this of course) than charge a flat $25 if they are later than a few days. You could also try putting the snow back on the drives if they don't pay. Or maybe a few buckets of water in key areas might work also. But I would never do that!!! We invoice everyone at the end of the month and expect payment within 14 days. This is stated on the contract and invoice. Is this too much to ask?
  18. valpoguy

    valpoguy Member
    Messages: 49

    18% is illegal, your state has a maximum per month, most are 1.5%. You may want to contact a lawyer to handle your contractual side of things