Collecting late fees...

Discussion in 'General Industry Discussions' started by topsites, Dec 15, 2006.

  1. topsites

    topsites LawnSite Fanatic
    Messages: 21,653

    Now in my 5th year, several times have I added a late fee to the bill once it becomes past 60 days due.

    Obviously in some cases I never got paid.

    But in every single other instance where a check finally arrived at the last minute (after they got the final letter before I send it off to a collection agency), nobody has ever paid the late fee.

    While most simply wrote the check for the original amount due, others were so smart that they added a smaller amount, as if to say that it is at their discretion to decide what the late fee should be.
    Either way it makes no difference, I got skru'd in part or whole out of the late fee. Yes, every single time lol.

    Over the years this frustrated me more, and more.
    The late fee exists for a reason, it's not just a deterrent but it also covers my time spent chasing / collection costs.

    So this last year I decided to re-word my final letter to include the phrase 'unless you pay the full amount due of $xx.xx [original + late fee], I have no other choice but to send this to collections' blablabla... And yes, I ALWAYS send a letter before that to inform them of this upcoming event AND the actual amount of the late fee (so nobody can say they were never told)... And for those who pay at the 2nd-last letter, no late fee (this I can live with).

    Of course, you know it: Once more someone got to that point (way over 60 days past due), and sure enough, they sent the original amount + $10 (my late fee is $45).

    So the next step is, once I clear the check through the bank, I'm sending the remainder to collections with a $35 balance.

    What would you do / have you done to alleviate this issue?
    Do any of you guys ever collect (read: actually receive lol) the late fee?
  2. AlleganyLawnCare

    AlleganyLawnCare LawnSite Member
    Messages: 180

    I charge a late fee and haven't had a problem collecting on them. i don't know if the difference in yours versuses mine is the amount (mine is only $15).

    HOOLIE LawnSite Gold Member
    Messages: 3,981

    $45 is more than a credit card company charges...I'm not sure what the legal limits are on late fees but might be something to check on. I just tack on a percentage each month so the late fees are not nearly that large.
  4. topsites

    topsites LawnSite Fanatic
    Messages: 21,653

    No doubt, but for a 10-15 late fee, why even bother?
    That's what bugs me, such a small fee to me is an insult.

    Someone is already 60 days overdue here.
    My credit card company charges me $35 if I'm 1 second late paying, I have a MAX of 30 days to make it.
    All of my expenses go on the credit card, it HAS to be paid or I then pay interest, too?
    And who pays the interest, say if I can't pay the full balance off?
    For what, a deadbeat?

    My bank charges me $35 if there is an overdraft.
    There exist multiple electronic, recurring and automated drafts coming out every month.
    While it makes life convenient, who covers this account while they play possum?
    Now we can argue between 35 and 45, but frankly I don't care.
    In Virginia, the late fee has no limits so long it can be justified.

    The late fee covers:
    - A second bill after 30 days, with due notice.
    - A letter after 55 days, with the late fee warning (we're talking 2 months here).
    - A third bill at the 65 day mark, with the late fee.
    - At the 75 day mark, filing and cost of the collection agency.
    - Usually, at least one more visit / drive by, sometimes a phone call.
    Not just fuel and stamps and envelopes and paper and inkjet cartridges, nevermind the time it took to draft the original, but also:
    - TIME: It takes time to chase after deadbeats, no matter if I just mail it off, we're still talking time I could've been out working...
    At the very least, one hour all in all.
  5. topsites

    topsites LawnSite Fanatic
    Messages: 21,653

    Maybe I should hide my late fee, by asking for new customers to sign a release so I can pull their credit record.

    Insurance companies do it, they charge extra on premiums based on credit scores.
    Other companies do it as well, maybe I should start...

    Folks with Fico scores of 760+ (A+) get the normal price.
    Everyone else gets a percent tacked on as the following default rates indicate:
    720-759, 0.9% A
    680-719, 1.8% B
    640-679, 3.3% C
    600-639, 6.2% D
    540-599, 11.1% E
    <540 high risk, 19.1% F

    Matter of fact, I won't even fool with D's and below.
    But then, who covers the cost of this?

    I can tell you one thing, thou:
    My non-payment issues account for less than 1 percent of total annual gross.
    So I'm not letting up, I know for a fact a LOT of companies operate closer to 10% default!!!
  6. Runner

    Runner LawnSite Fanatic
    Messages: 13,497

    The only thing about late fees, is that it HAS to be agreed upon before the first bill is even issued. This must be a written contract...No verbal contract will due- like for a normal service agreement. When your credit card co. issues a late fee, yu have a contract that you signed that says you agree to that (it's in there, somewhere). When the insurance company issues a late fee, they have your signature on it as well. Same goes with the ca/satellite/cellphone co. that issues an early termination fee.
    While some people may pay these fees (whether they be flat late fees or interest), be careful sending them to collection agencies and such. If they wanted to fight these, they could. This could lead to a headache for you. I have some customers that have been dragging their feet on me, and when I talked to her again last week (her promising partial payment by last Friday), she said she isn't going to send the whole amount at once (only about $200). I said fine, as long as we have SOMEthing coming in. Well, this is the final notice I sent out to them today (certified mail).

    Mr. & Mrs


    Dear Mr. & Mrs. :

    We have contacted you several times to obtain payment of your past due account. Your balance of $207.00 is now more than 90 days overdue.

    We consider this a serious matter. Unless payment in full is received within the next five business days, we will have no alternative but to refer this matter to a collection agency or institute legal proceedings. Any amounts of this overdue balance not received within 5 business days of date of receipt of this letter will be referred.

    A copy of your statement is enclosed. Please call us immediately to discuss your plans for settling this matter and to avoid the inconvenience a delay will bring.


    &#8211; Owner,
    Ground Control

    This way, if they want to dink some more and send me bits and pieces (because I know that's what they will or would try to do), then let them. I'm all done playing the games.
  7. Picture Perfect Landscape

    Picture Perfect Landscape LawnSite Member
    Messages: 176

    I think you are too leniant. For regular services (maintenance) I bill the customer every time, and give them 14 days to pay. Thus giving them time to receive their next pay check if indeed the one they would have just received is already gone. I give them a 5 day grace period to get it mailed in, so that incase they get paid on the day its due or a day after they can still get it in. Then I charge 5% or 5 dollars which ever is greater per month until I receive the money. Its not much but its enough to put some incentive. I think 45 is high to just slap on someone. But I do understand you point.

    I don't know how alot of companies do it, but to me waiting 30 days to notify someone is a little late especially for maintenance. You could have cut a whole month. If I go two cuts with no payment I stop cutting. Been screwed too many times.
  8. daveintoledo

    daveintoledo LawnSite Silver Member
    Messages: 2,587

  9. mdvaden

    mdvaden LawnSite Bronze Member
    Messages: 1,946

    The legal limit of a late fee, is probably what two people agree upon by signatures.

    We have a $50 late fee.

    That late fee is for any payment not postmarked or recieved by us within 10 days of completion.

    And the that payment must be accurately addressed too: also specified in the contract.

    Everybody pays on time, because the late fee is so substantial, with so little time to postpone and forget about it.
  10. fiveoboy01

    fiveoboy01 LawnSite Silver Member
    Messages: 2,988

    That was my thinking on the matter. I'd doubt that there is a law that addresses that if both parties agree.

    Now if you try and charge one without the written agreement of the customer, then yeah, you probably don't have a leg to stand on.

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