Charging interest on late payments

Tree-Taylor · Mar 12, 2018

Hey guys,

How do you guys work this into your contracts? What is the time period and rate? I have a really good client that I subcontract for but payment seems to be a lingering issue. I don't want to ruin the relationship but he's starting to take advantage of my generosity and I need to come up with a fair solution to secure payment. Input is much appreciated.

flyingsquirrel25 · Mar 12, 2018

This is the first item in my terms of service.

Payment Terms – Payment is appreciated upon completion of the tree care listed on the work order. Payments not received within 15 calendar days of invoicing will be subject to a $25 late fee, unless otherwise specified. Invoices not settled within 30 calendar days of original invoicing will be subject to 3.0% finance charge per month outstanding. If a client fails to pay the invoice, the client shall be responsible for the costs associated with collection including but not limited to attorney’s fees and collection agency fees.

Seldom do I need to use the 15 day. And I haven’t had to go to the percentage.

802climber · Mar 13, 2018

Some people are just gonna try to use you as the bank, and you can have the most bulletproof contract in existence but they don't give a shit it's just how they operate. I would either mention it to him and/or start writing Due on Receipt / Net 15 days and the actual Due Date prominently on your invoices.... and just know that he is a slow payer and plan accordingly... send regular invoices.... IMO adding a bunch of fine print to an existing biz relationship, might not go over well but it's all in how you go about it I suppose.

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ATH · Mar 13, 2018

Better make sure you are squared up with fair credit and collection laws. They are not business friendly...

Personally, I think 15 days is too short...I do 30 days. I know when I get a bill due in 2 weeks, it fees like they didn't give me much time. A lot of people try to sit down once or twice a month to pay bills. But then again, it is not like they didn't know that bill was coming and would be due in 15 days, so maybe that isn't too short.

Having said that, I don't get too excited about a few days here and there. Bigger things to worry about I guess. If the money hasn't shown up in about 45 days I'll send a reminder letter...not a nastygram collections letter, just a reminder. People pay pretty quick after that. I've offered monthly payment plans to a few folks at no additional cost. It happens so infrequently, I'm just not losing money on it so I don't care. I'd rather them remembering me by the quality of our work than our collection practices.... Heck, just today I got a check that was about 15 days past due. Was thinking I'd call this week...he gave us a 5* review online and wrote a very nice note on the invoice.

More directly to the OP - perhaps offering a payment plan will be enough get the money moving in without sounding pushy? Or, even if they take you up on that, is it that big of a deal? What is the relationship worth?

evo · Mar 13, 2018

For me
Payment is due upon completion. I don’t take deposit unless buying materials out of pocket (mulch, trees, complex cabling etc). Payment is considered late after 3 days, and 3% interest starts at 30 days. I do not accept being placed on a net 30 or 15 cycle if working for a larger organization.
I’m not a phone bill, or a monthly recurring service.
I’ve only had a few issues with associations who have bookkeepers or accountants paying on a net 30 cycle. There is the subtext mentioned “unless otherwise negotiated”. I might make a extra phone call ever few months as a reminder, but only once charged the late fee. Got paid right quick - the late charge

Jasonk · Mar 14, 2018

Working for larger contractors 30 days usually is not feasible. Especially on projects we are sub contracted to the state or other agencies that may be slow to pay. Home owners we expect in 30 days or under but even though our contract states 30 days, we won't charge a fee to bigger contractors if it goes to 60 or so.... If you want your money quick accept credit cards. We set it up on Jobber as an option and its amazing how many of our invoices are pd right away by cc.

southsoundtree · Mar 15, 2018

IDK, but its possibly that some states allow a CC fee to be passed on.

I did a job yesterday that the customer/ neighbor to our ongoing work where he said he need to pay by CC. Easy to do for one customer, without making it open season for your wallet to pay for 'their miles'.

Probably check by state.

ATH · Mar 15, 2018

I am fairly certain that McDonald's Walmart Davey Tree ServiceMaster Carpet Cleaning Etc have figured out how to remain profitable while still accepting credit cards. I accept cards using a square reader these aren't that terrible. On bigger jobs it feels like more ... but then I've also got to realize it was a big job that paid a fair amount to start with. On little jobs its the same percentage but a few dollars just doesn't seem like that much...

ATH · Mar 15, 2018

Jasonk said:
Working for larger contractors 30 days usually is not feasible. Especially on projects we are sub contracted to the state or other agencies that may be slow to pay. Home owners we expect in 30 days or under but even though our contract states 30 days, we won't charge a fee to bigger contractors if it goes to 60 or so.... If you want your money quick accept credit cards. We set it up on Jobber as an option and its amazing how many of our invoices are pd right away by cc.

Yeah... working with those large contractors is in a whole nother ballgame. They have Payment Processing departments that may only pay bills once a month and somebody else that approves them first... if you miss that billing cycle by a day it will be at least 2 months before you get your payment. I found that they offer plenty of other headaches as well. That just means you need to account for those headaches when you bid the job.

Tree-Taylor · Mar 18, 2018

Thanks for all the comments guys. I have been reading them just haven't had time to reply. It's a tricky spot since I subcontract for him and he gives me a ton of work. We originally had a gentleman's agreement that I would get paid after he got paid but it's no longer within reason. All of my residential clients pay upon delivery of service but I try to give my industry contracts a break since they're feeding me work and we try to take care of each other. Someone always has to push it too far....