Late Paying

Discussion in 'Lawn Mowing' started by Ray & Karen, Oct 23, 2003.

  1. Ray & Karen

    Ray & Karen LawnSite Member
    Posts: 138

    Do any of you charge a late fee for payments not received. I send a pre-addressed return envelope to all of my customers. Most pay immediately, but there are some who are almost a month late...every month. I don't want to drop these customers, because I have a tight/easy route. They eventually pay, but I get tired of financing things that come up such as their kids soccer camp. Now getting to my question, do any of you charge a $10 or 10% fee for checks not received by the 15th of the month.
     
  2. BobR

    BobR LawnSite Senior Member
    Posts: 714

    Ray N Karen

    I myself do not charge a 'late fee' but I do not see any thing wrong with initiating that procedure. Just let your customers know (send all customers a letter) that you expect payment by the 15th or a 'service charge' of 10% will be added to the next months bill, you do not have to be nasty about this just explain that you have financial obligations to be met and that receiving payment for 'services rendered' by the 15th would be most appreciated. If you have a 'contract' with your customers you could add a paragraph outlining the '10% late fee'.
    BobR
     
  3. naturescape

    naturescape LawnSite Bronze Member
    Posts: 1,695

    Anything beyond 2% a month is illegal. However, I think if you have them sign a contract stating a flat late fee, you may be alright. Anybody know about this? I wouldn't mind doing it in my contract next year, but it's not worth doing for 2%/month.
     
  4. scott's turf

    scott's turf LawnSite Senior Member
    from NH
    Posts: 949

    I've heard this on this site before. My mortgage has a 5% late fee. I used to have a $10 late fee but found it was unfair if someone paid on time but not completely. I have not had one complaint about the late fee or the implimentation of it.
     
  5. naturescape

    naturescape LawnSite Bronze Member
    Posts: 1,695

    Well, you can always state in your contract that it COULD apply, then just charge the customers the late fee that you think deserve it. Like customers that pay late EVERY month.....
     
  6. Jimbo

    Jimbo LawnSite Bronze Member
    Posts: 1,093

    I sure would like to know where someone came up with 2% being the maximum. Your customers are getting an interest free loan of sorts and credit card companies charge up to 27% for that privelage.

    Unless you have a link to a Government law regarding this you should not continue to post such non-sense without knowing the facts. If someone can find such a link I will forever eat my words.

    I myself impose a flat $15.00 late fee on a particular customer and they never pay it. I then claim the unpaid late fee's as a loss on my tax returns.
     
  7. naturescape

    naturescape LawnSite Bronze Member
    Posts: 1,695

    www.bodmanlongley.com/PDFs/const-sp03.pdf+legal+advice+Michigan+late+fees+contractors&hl=en&ie=UTF-8]Here's a link I found for late fee advice for Michigan contractors.[/URL]

    This is the main part of the page that concerns us:

    Late Payment Charges: Obtaining interest on a
    past due amount presents difficulties because of federal
    and state law relating to usury, truth-in-lending,
    consumer financing, and other laws. To obtain
    compensation for inconvenience and additional
    expense relating to collection of past due sums, include
    a clause in your written contract providing for a late
    charge or late payment fee in the event of nonpayment.
    Failure to do so ELIMINATES your right to a late payment
    charge. However, the charge MUST BE REASONABLE. A
    charge of 1½ percent per month on the past due balance
    may be reasonable depending upon the circumstances.

    This text is under their copyright.

    The caps on type are mine for emphasis.
     
  8. Jimbo

    Jimbo LawnSite Bronze Member
    Posts: 1,093

    That makes sense. Obviously you should have your policy on late fee's spelled out in your contracts or in a legal battle you may not win.

    "Reasonable charges" is very broad and I consider reasonable charges the oppourtunity cost of keeping my money elsewhere. This could obviously be alot more than 1 or 2%.

    You might want to keep your money in a CD paying anywhere from 1-3% in todays rough economic times, or in a Treasury Bond for up to 6%. You might even stretch it and say you would rather invest your money in stocks where the historical average has been around 12%.

    If anyone settles for less than 3% (currently) you are just being a bank for your customers.

    Jimbo

    FYI- My fee is 6%
     
  9. newleaflandscape

    newleaflandscape LawnSite Senior Member
    Posts: 348

    I am in michigan. I had a lawyer draw up my proposals-contracts. In the contract it says directly that if payment is not mailed within ten days after invoice is recieved that a fifteen percent late charge will apply. You may think that kind of sucks asking for payment within ten days of the bill, and so did I when he printed it up. But then he reassured me, that if they dont pay in ten business days, it will take about five days for late notice to get to them, and usually your late notice is just a warning. Then if they dont pay in another ten days, you send them a new bill saying what the total amount do is now. Overall if people dont end up paying, they have about twenty five days before the late charges apply. I have used that contract for about two years now. I can honestly say I have only had two problems with people paying; One went on vacation and never told me, so I waived the fee. And the other I had to take to small claims, and YES I did get my fifteen percent.
     
  10. mowerman90

    mowerman90 LawnSite Bronze Member
    Posts: 1,491

    I don't see why more of you use my system. EVERY customer is under contract. The contract states that if they don't pay by the 10th of the month there's a $10 late fee applied. Oh, by the way, all of my customers pay for the months service IN ADVANCE. Once burned, twice learned, as the saying goes. I got shafted for almost $2000 when I started this business back in 1989 and that's the reason I started making everyone pay in advance. It was the single most important business policy I've made. Like others have said, "don't be a bank for your customers".
     

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