You completed your end of the deal – rendering services or delivering goods – but now your client is ignoring the invoice. You can charge a late fee or interest, but make sure the original contract the client has signed clearly states any fees or interest charges that will be assessed.
Select software with built-in templates for charging fees and interest
Install software that not only has invoices but will compute late charges for you.
Use the right forms that include agreement to pay interest
A promissory note is a written promise to pay money that is owed. This is written evidence of the debt and the terms under which it will be paid, including any interest or late fees.
Send a demand letter
If someone owes you money and gets behind on the payment plan, work out a new one. If that doesn't work, send a demand letter. But don't threaten to take action -- for example, sue in small claims court – unless you intend to really do it.
Use calculators to figure out interest rates
Late fees are usually assessed as a monthly finance charge.
- To calculate late fees, first decide on the annual interest rate you want to charge, then divide that by 12. Next, multiply that monthly rate by the amount due to arrive at the monthly late fee. Example: You have a 12 percent late fee on a $10,000 project. Divide 10,000 by 12 and get a monthly interest rate of 1 percent. Then multiply 1 percent by 10,000 - and you arrive at a $100 monthly late fee.
- Will clients really pay late fees and interest charges? Most small business owners dealing with slow-paying customers would be happy to just get paid – but documenting a paper trail that can be used as evidence in small claims court – and then threatening to take the client to court - can convince most customers to pay the whole bill – fees included.