Can we charge a fee if a client pays their invoices late? – StartupSmart

Part of our business has a consultancy role and if a client wishes us to work from their office we charge them airfares and accommodation. We only charge these at cost and therefore when the client does not pay on time we can be out of pocket for credit card interest. Can we charge a fee if a client pays their invoices late?

 

The problem with late fees is the angst it causes and the destruction of goodwill it can bring. Penalties have been known to drive clients away from doing future business.

 

However, if you do choose to charge late fees, you need to alert the client as to your terms and the percentage per month you will be charging on top of your costs. These terms need to be part of your contract and clearly stated on your invoices.

 

The best option for any business is to avoid going down the road of charging penalties. A good way to do this is to:

 

1. Have a good risk analysis and customer vetting process. Know your customers.

 

2. Establish clear expectations and develop a good, respectful relationship.

 

3. Don’t be shy in stating your company policy is for all airfares and accommodation to be paid in advance. Ask whether they would prefer you make the bookings and invoice them or whether they would prefer to make the bookings on their company account.

If the former, make the bookings, send the invoice with the due date. If the invoice isn’t paid by that date, let them know – give them a chance to pay the account immediately – or reschedule your commitments.

 

4. Airfare, accommodation, travel costs should be invoiced separately to any work undertaken.

 

The majority of businesses are happy to work within these guidelines. If they aren’t, perhaps you need to seriously reconsider point one.

 

If a business is worried about on-charging costs that are required in order to do the job they’ve been contracted to do – then the problem is theirs, not the client.

 

I personally don’t believe in charging penalties. But I do believe in advance payment for travel and accommodation.

 

In eleven years of constant travelling and working with businesses I’ve never had an issue getting payment in advance for the travel aspect of my business.

 

And, quite frankly, if there were an issue, I’d have to reassess the viability of working with that client because the way they start is usually the way they finish.

 

They don’t want to pay my travel costs up-front? Then they probably are not going to pay my invoices on time.

 

I simply state:  “Our policy is travel and accommodation up-front. Would you like to organise that or shall I organise it and invoice you?” Done. Not an issue.

 

If you are uncomfortable saying this, you have to look at yourself, your policies and your belief system.

 

By not saying it, you run the risk of late payment and extra charges. You then get irritated and resentful. Surely it’s easier to implement the policy of payment up front?