My suggestion: Develop a policy now for new clients that tells them they'll pay x percentage for each day past due for payment. For existing clients, you may need to suck it up if you are worried you'll lose them. Then again, perhaps by asserting your boundaries you'll show them why its important to pay you on time and more importantly respect you.
It really should depend on how much their late return is costing you. If your product is less than $100.00 think in terms of $5-10. If the profit you are losing exceeds that then estimate and gradually increase it.
Try a carrot instead of a stick! Increase you charges overall and offer a prompt payment discount (better Marketing & and an incentive too)!
I agree with Greg, I ran my own wholesale business for over 25 years with some pretty high annual volumes. Over half the business was on open 30 day terms. Even if you have a stated policy that the customer understands of adding a late fee monthly of 1 - 1.5%, I found that a small number of folks will actually pay those fees. The banks and other large institutions can get away with that...but it is hard to pursue those fees for a small business.
I suggest you work towards getting more sales on a credit card basis so you are not 'the bank' for your customers. It will cost you the 2.5% - 3% processing fees but there are no headaches or waiting for your funds.
You can also offer a small discount to get a customer running late to pay their bill NOW rather than dragging it out longer (I used to offer 5% discount just to get the bill paid up). Then you put them on Credit Card or Prepayment ONLY...no more open terms! This is usually for customers that are running 60 - 90 days or more past the invoice date.
I hope that helps..
Depending on the industry you are operating in, you may impose a late charges between 1-2% is acceptable. Alternatively, you may demand a deposit upfront, with balance of payment upon commencement of work.
All the best in your collection effort.
It is unlikely you will collect very many if any late fees; you are better off charging more if you expect a client to pay slow. The only value of late fees are if you have to sue a client to get your money; then the courts will award late fees if your invoice states clearly what the late fees are--copy from your credit card statement, because they're the best.
Usually every Obligation Law prescribes minimal percentage of penalties in case of payment overdue. This is possible to implement even if it is not contracted, "implementation by the force of the law". And of course, your customer will not be angry only if you keep quiet.
In my opinion, the only solution is payment before delvery. Unfortunately, even a good contract is not a deterrent for a bad payer. P
I'm not a great believer in late fees. I have always felt that if you are doing your due diligence on your customer base and utilizing sound collection and communication processes, delinquent or late paying accounts will be kept to a minimum. Many customers find your late fees just another way to increase profit and not a deterrent to payment methods. The fact that a long time "slow paying" customer is charged late fees becomes an annoyance that you end up writing off anyway. Price your products according to your industry and work with your customers. They will appreciate it and you will not create any hard feelings.
If you have an equal discount for early pay term and a grace period before the late fee you have presented as fair an opportunity as one should expect.
Business must have the mathematical formulas for every unique task, with respect to your question, its relation of following parameters:
1-Client business status.
2- Your work or product according to client.
3- your own business status.
4-Flexibility according to market.
these all things discuss with client at the time of agreement, so you can not lose client but you build confidence of client.