Payment in full upon receipt.
February 27, 2009 1:19 PM   Subscribe

I want to collect late fees, or at least get a freelance client to pay up faster.

I do freelance work regularly (but not continuously) for various companies. They send me checks made out in my name--I'm not incorporated or anything like that. One of my clients takes 3-4 months from receipt of invoice to pay me. They don't fail to pay me, it's just that the lead time is ridiculous. You know the ol' double standard--they can pay me in three months, but I have to pay the mortgage every month or pony up a late fee. So why can't I be like the mortgage company and submit an invoice that says "payable within X number of days or late fee will apply"--and expect my client to pay me that late fee? (I guess it's probably an empty threat if I don't have a legal or collections department to back me up, but if anyone has any hints, I'll appreciate hearing them.)
posted by scratch to Work & Money (16 answers total) 5 users marked this as a favorite
You do repeat work for them? Add the "late fee" to their next bill?
posted by fantabulous timewaster at 1:25 PM on February 27, 2009

"So why can't I be like the mortgage company and submit an invoice that says "payable within X number of days or late fee will apply"--and expect my client to pay me that late fee?"

You can. All of my invoices say "payment due upon receipt".

If your invoice has absolutely no note about when you expect payment; start adding that stat. My basic template always includes the above line unless I workout other arrangements before hand. You might also want to find out what the maximum you can charge as a late fee in your state, and start including a clear notice on your invoice about that as well.

At 45 days call and remind them.

At 60 send a "30 day late" notice with the calculated fees included. You'll either get a payment the next week of the original amount (with no late fee -- at which point send a "tahnk you" letter saying you've waived your late fee this time), or pay the whole amount (woohoo for you!).

Do the same at 90 days if they don't pay at 60.
posted by SirStan at 1:27 PM on February 27, 2009

"Add the "late fee" to their next bill?"

Dont just *add* a late fee without having language in your contract (you have a contract; right?), or on the invoice. Even then; if you charge too much (most states have a limit to the late fee amount, as a percentage of the invoice amount) you could be in trouble legally.
posted by SirStan at 1:28 PM on February 27, 2009

Yeah - this depends on your contract.
posted by Pants! at 1:30 PM on February 27, 2009

It's not a new idea, but I've had luck calling the late fee the regular fee and offering a price break (the actual price) if the pay within 45 days. Often clients feel they're saving money by paying you on time.
posted by lpsguy at 1:31 PM on February 27, 2009 [2 favorites]

3-4 months? That's insane. Stop being such a pushover. We send accounts to collections at 60 days! Usually a threat is enough.

First off, you need to establish some rules:

When you start the work, establish the payment terms: We use net 14. You specify in advance that you charge a 10% late fee for payments received after 14 days. Sometimes, you might even collect it.

Then, as soon as day 10 rolls around, you send them a reminder. At day 15, you start calling them and you don't stop calling them until you get your money. If they have an accounts payable department, make sure they get a copy of your bill and a phone call every single day until they pay it. Be nice, and feign disbelief when they try to weasel out of it. "Next week? Hmmm. Those aren't the terms we agreed to."

If they chronically pay late, charge them more. Increase your rates. Add in the time you spent chasing them for their money.

Make them a lower priority, and make absolutely clear why. "Sorry. The reality is that I have to put my paying customers ahead of my delinquent accounts."

And as soon as possible, fire that client. Don't work for assholes.
posted by brian60640 at 1:33 PM on February 27, 2009 [2 favorites]

Seconding "payment due on receipt" and a "discount" for paying on time.

Also, you might consider accepting payment through PayPal, if you don't already, so clients can use a credit card. I use Freshbooks to send the invoice with a link that lets the customer pay with a credit card. But you could do the same with regular PayPal and just a link in an email. This is especially useful if you require partial payment up front before you begin work. Clients are very motivated to pay if they're in a hurry to start the project.
posted by PatoPata at 1:44 PM on February 27, 2009 [1 favorite]

Best answer: I've been a consultant for 12 years and I run a blog on surviving and thriving as an independent consultant. I make clients give me 50% up front. All my contracts specify that payment is due upon receipt of the invoice. I charge an annual percentage rate that is the same as a department store credit card AND I have checked this against usury laws for my region. I do not do repeat business with clients who pay late, with the rate exception of a client going through cancer treatment or some other such extenuating circumstance. When I don't receive payment on time, I go through a process of elevation: email, phone, demand letter, court filing, etc. I proceed to court filing at about 60 days, EXCEPT when I have agreed to such as situation, such as with a Fortune 500 firm. If other works is in progress, it stops -- and my contract notes this.

You might also want to look into factoring your invoices. Some factoring companies will give you a percentage of the invoice up front and then they take over all the billing. I've never felt it was worth giving up that money, but your mileage may vary.

I also charge an idiot tax.
posted by acoutu at 1:48 PM on February 27, 2009 [4 favorites]

I was using PAYMENT DUE UPON RECEIPT, and getting an average response. Just switched to posting an actual due date, so I'm going to see what effect that has on return promptness. Some customers seem to pay immediately, others take their time - but all have paid after I send a "PAYMENT OVERDUE" bill after 60 days.
posted by backwards guitar at 2:21 PM on February 27, 2009

Best answer: Having been in this position as the sole proprietor of a freelance graphics business, I can tell you that this is not an unusual happening. This situation may be a bit harder to fix with this client because you already seem to have a track record of allowing them to pay late. First, you need to decide how hard line you want to be with this customer. If they are a big source of your income, or could possibly lead you to future sources of business, I'd be tempted to bite my lip a bit, just for that reason, but I still would not let them get by with waiting so long to pay. My limit was 30 days, tops. Here's what I'd do:

• As already mentioned, be sure to include your terms on your invoice. You'll be on more steady ground to be able to say that the fee policy is on the invoice when it is sent out.

• When sending the invoice, do not state in the terms that payment is due "in x# of days". That leaves openings for "oh, I didn't get the bill until...", "do holidays count?", "are those business days?", etc. Include a due date on the invoice so there is no doubt when it should be paid. You might say, " Payment due in full on March 5, 2009. Payments received in our office earlier than the due date will earn a 5% discount on their next job. Payments not received in our office by March 5, 2009, will incur a late fee of *name your terms*". You can then adjust your fee however, but be honest if they are paying on time. That not only encourages them to pay early, but may encourage future business.

• To help add weight to this "new policy" for payment, I would send out a flyer to all your clients, preempting this client's next invoice. Thank your clients for their business and say that you have new terms for payment, and then state your well thought out policy.

• Be prepared to lose this client if you make on-time payment an issue. Some businesses pay this way because they are on a shoe-string budget. Others pay this way because their business is just poorly run. But businesses that have had a habit of doing this, do so because you let them do it without consequence.

• Encourage open dialogue with your customers. Hear them out. I have been known to cut some slack to those who communicate with me, but the bottom line is that I was in business to pay the bills--just like they are.

Good luck!
posted by konig at 3:12 PM on February 27, 2009 [1 favorite]

One of my clients takes 3-4 months from receipt of invoice to pay me

As a point of information, this is long but not a completely ridiculous amount of time; I have some corporate clients for whom it can take about that long for an invoice to wind its way through their bureaucracy. Especially if you're dealing with a small department in a large company, the people who you're actually working with may have no control over this.

I understand that it's irksome, but rather than taking the (somewhat confrontational) strategy of applying late fees, which might backfire and lose you the client, you might consider just raising your hourly rate slightly for that client, to make up for the inconvenience of having to wait a while for them to pay up.
posted by ook at 4:13 PM on February 27, 2009 [1 favorite]

If it's not in you contract you can't get late fees. (Put it in your contract next time. Or ask to sign a new one.)

Best results come form offering a discount for early payment. I've found 2.5% for 7 days gets the best response without hurting my bottom line too much.

As ook said, some corporate clients just aren't going to be able to pay you in what you think is a reasonable time. The red tape and interactions of their internal departments may take 90-120 days, no matter the fines or enticements. In the future bid projects based on this, but don't be afraid to ask them if there is a way to expedite payment. For one company I worked for the rules were that anything after the 21st of the month was only sent to payment at the end of the next month. And they payed 60 days after receipt, so I made sure I got my invoices in by the 21st or it would add a month to my payments.

And some companies you just need to bug them to pay. Another company won't pay at all unless I bug them after 30 days. When I send the "you're 30+ days over" they send payment the same day, but not until then. *shrug*
posted by Ookseer at 11:03 PM on February 27, 2009 [1 favorite]

Response by poster: I definitely cop to being something of a pushover; current excuse is that they are one of my two biggest clients and I really can't afford to lose them by being "demanding," what with the economy and all...there's always more labor out there lining up for a job in the piss factory. But the hive mind has provided me with lots of good info here. Thanks all!
posted by scratch at 6:57 AM on February 28, 2009

If they decide to go elsewhere, you have a good 3 or 4 months to replace that income.

Hire someone part time, or find a contractor who can call about your late invoices if you are bad at this. It's worth it.
posted by yohko at 12:11 PM on February 28, 2009

I have some corporate clients for whom it can take about that long for an invoice to wind its way through their bureaucracy.

Yep. We go to bat for our small vendors and try to get them paid quickly. If it's a corporate client, try and find the support staff person who's in charge of hassling the accounts payable group. A member of my support team does this and she can sometimes get a payment expedited.

Best case, we pay vendors in about 60 days. I've worked for several big corporations - they are all slow payers, but do eventually pay.
posted by 26.2 at 5:59 PM on March 1, 2009

Some customers seem to pay immediately, others take their time - but all have paid after I send a "PAYMENT OVERDUE" bill after 60 days.

In my experience, this is the key. When you act like any other biller, you tend to get treated like other billers, aka more seriously. When you act like a person, you get ignored. Finance departments know how to deal with past-due invoices, by paying them first. You may think it is nice to send a gentle e-mail reminders to your contact, but that just doesn't get action.

Imagine if your mortgage company just called you up and gave you a gentle reminder your payment was due? And then someone else sent you a LAST NOTICE letter demanding payment on receipt. Which one would you pay first?
posted by smackfu at 11:37 AM on March 2, 2009 [1 favorite]

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