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Canada & USA: Charging interests to a client who doesn't pay
Thread poster: Julie Roy

Julie Roy  Identity Verified
Canada
Local time: 14:59
French
+ ...
Dec 15, 2004

A large amount has been owed to me by a direct (regular) client since August. He has made small "token" payments toward that invoice, but nothing since late September. This particular contract was so large that I had to "hire" fellow translators to help and I ended up having to borrow in order to pay these colleagues (this was MY commitment). I informed the client about that, to no avail. (Lucky for me, the loan—which I repaid—was a personal one at 0% interests.)

I informed the client (first on 16 September, and again this month) that I would begin charging retroactive interests—starting when the invoice was due—but would be willing to forgive these if the entire amount was paid by 15 December... today!!

After I harassed them, the client phoned last week and promised the $$ would be ready for me to pick up "hopefully Thursday or Friday at the latest" (last week). They also said the same in October and November. I am not very optimistic.

My question is three-pronged:

1. Is charging interests a common practice in North America?

2. If so, how do I determine the interest rate?

3. Not being skilled at accounting, how do I apply that rate to the amount?

If the client still does not pay, I intend to take them to small claims court. However, the media (always hanging around courthouses) would be more than happy to jump on a piece of news like that and it would cause a lot of turmoil for the client… I would rather avoid this as much for me (could burn some bridges) as for the client.

What are your thoughts on that?

Thank you.
Julie


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Henry Hinds  Identity Verified
United States
Local time: 12:59
English to Spanish
+ ...
Lawyer Dec 15, 2004

Being uneducated in such matters, my first thought would be to consult a lawyer on such a matter. First, is there any provision in your contract for interest and penalties in cases of late payment? Is there even a written contract? And second, what jurisdictions are you involved with? USA and Canada are big places, and in the USA every state has its own laws in such areas, it's like dealing with 50 countries. If more than one jurisdiction is involved then you will need to consult more than one lawyer, and things get complicated.

Of course it's best not to deal with any clients you're not close enough to go over and strangle if they don't pay you. If it's practical to take them to court, then don't worry about adverse publicity, it will show that you're serious. If you are afraid of offending the client, then go ahead, keep on working for them for free!


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NancyLynn
Canada
Local time: 14:59
Member (2002)
French to English
+ ...
Blue Board Dec 15, 2004

Hi Julie

What does the BB say about this outsourcer?

Nancy


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Julie Roy  Identity Verified
Canada
Local time: 14:59
French
+ ...
TOPIC STARTER
direct client Dec 15, 2004

This situation is occurring with a direct client who had always paid me in a timely manner (7 days), but the invoices were never as impressive as the August one.

We have no contract per se, but an agreement documented in e-mails as well as a history of invoices/payments. I provide this client with a standard (pre-negotiated) rate that includes translation, proofreading and Web development services, so there shouldn't be any surprises.

Because this is a client I personally recruited in my area, they are not a proz.com outsourcer. Even though I may not want to continue offering my services to this client—unless they sign a PO every time—I have my reasons for not wanting to burn the bridges...

I appreciate your suggestions...
Julie


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Tina Vonhof  Identity Verified
Canada
Local time: 12:59
Member (2006)
Dutch to English
+ ...
Bridges??? Dec 15, 2004

Julie Roy wrote:


If the client still does not pay, I intend to take them to small claims court. However, the media (always hanging around courthouses) would be more than happy to jump on a piece of news like that and it would cause a lot of turmoil for the client… I would rather avoid this as much for me (could burn some bridges) as for the client.

What are your thoughts on that?

Thank you.
Julie


Hi Julie,

I've been in a similar situation, that is, with a translation agency, not a direct client.

If you don't receive any payment by the 15th, I would first contact the client by (registered) mail, document the sequence of events, and tell them that you intend to take them to small claims court if payment is not received by ... (you could give them another deadline. Point out that you would rather not do this and save them the embarassment but that the delays in payment have gone on long enough and you cannot wait any longer. See if that generates any action.

I do want to warn you that, in Canada at least, it costs quite a bit of money to go to small claims court and it can be successful only if you have everything documented, i.e., a contract, invoices from the other translators, a document regarding the loan, letters or e-mails regarding the delays in payment etc.

If they still do not pay and you decide to go ahead, why worry about the turmoil for the client or whether or not you are burning bridges - do you really need clients like that? If they care about their reputation, they should pay you immediately.


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Johanna Timm, PhD  Identity Verified
Canada
Local time: 11:59
Member (2002)
English to German
+ ...
show your claws Dec 15, 2004

Hi Julie,
Sorry to hear of your dilemma.
My invoices include at the bottom a note that clearly states “all invoices are payable upon receipt. For payment received later than 30 days after the invoice date, a surcharge of 2% of the invoiced amount applies.”
Two years ago an agency (a reliable & regular client) failed to pay me within the specified period. It turned out they had to sort out some financial difficulties and I initially granted them a grace period of three months. After that time, I started sending them reminders and invoices for the interest they owed me (which alone amounted to almost $ 1000 from various assignments over a couple of months) PLUS, eventually, for interest on the interest due [my mathematically inclined son helped me with that] - and of course I stopped accepting new assignments from them. Eventually, I received cheques covering fractions of the initially invoiced money, but by and by they paid back every cent – and as soon as this issue was settled, I started working for them again.

Sometimes you need to show your claws

Good luck,
johanna





[Edited at 2004-12-16 02:40]


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Will Matter  Identity Verified
United States
Local time: 11:59
English
+ ...
USA interest rate for overdue bills. Dec 16, 2004

The standard interest rate for this sort of thing is 1.5 (one and one-half) percent of the total amount per month which equals an accrued annual interest rate of 18%. (18% APR). If we don't pay a phone/gas/utility bill (basic services) this is what they will charge and the amount is added monthly. This is considered to be the "carrying charge" for the amount of money owed or financed. Very standard,common and accepted. Of course, you could charge more (for your wasted time and the inconvenience of not being paid) and it would probably be allowed if you had to take the agency to court but 1.5% per month is COMPLETELY acceptable.

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Vladimir Dubisskiy  Identity Verified
United States
Local time: 13:59
English to Russian
+ ...
no contract - no game Dec 16, 2004

i'd think three times before even telling the client that i bring them to the court (even small claims court). And you do not have a contract - what if they foregt everything and simply tell that you are harassing them demanding payment for the job poorly done... And no matter what the result will be this issue may blemish your professional image for years as not every client would bother to check whether another clinet's claim was right or wrong (it happened... that's it).

So, think hard before go legal. Probably the best option is simply to forget the whole thing and concentrate on some other jobs / opportunites / prospective clients...

Cordially,
V.


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Suzanne Blangsted  Identity Verified
Local time: 11:59
Danish to English
+ ...
interest charge Dec 16, 2004

When I have a client who is late with a payment, I remind them by sending a "reminder invoice" and on the bottom of that second invoice write a note - something like "A 10% fee will be charged on amounts past due 60 days". This is not an interest charge, but a my late charge that I notify the client I will be charging on the amount due if not paid right away. I do not write that on the first invoice, only on the second or third one. This usually gets their attention, and I usually get paid but "of course" only the original amount.

I recommend you request a PO# for invoicing BEFORE you start any project, and if no response tell your client that you can't return the translated work unless you have a PO.


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James Girard  Identity Verified
Germany
Local time: 20:59
English
+ ...
Contracts and Late Fees Dec 17, 2004

I completely agree with Blangstad, but with one addition:

When you agree to do work for a client you need to have a contract that clearly states your payment expectations and that is agreed to and signed by them.

Forget interest rates, they are immaterial to this discussion. If you state in your contract that payment is expected within a certain timeframe, otherwise late fees (which you set) will apply, then the client is legally obliged to pay you on time or suffer the consequences.

This is not only good business practice, but common sense. I know that very often in this business people will work on good faith and personal relationships. There is something admirable about that, but, there is nothing admirable about your money earning your client interest while you're waiting months for it.

When you make things perfectly clear up front, then not only do you have a legal leg to stand on, but, you won't feel guilty about pestering clients for payment. Decent companies expect this, and also try to hold on to their capital as long as possible. It's all about doing good business.

If you don't reach an agreement up front, then companies can pay you whenever they like and there isn't a thing you can do about it short of making a complete pain-in-the-ass out of yourself. And I think that for most of us, that's not something we prefer to do as professionals.

We are in the business of clear communication, after-all. So why not make it easier for everyone involved by communicating clearly your expectations for payment from your client before you type a single word for them?


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Crystal Samples  Identity Verified
United States
Local time: 13:59
French to English
+ ...
What about repeat clients? Jul 30, 2009

I know this post is old, but I just found the information very helpful for my current situation. I, too, am currently going through some non-payment issues with a regular client. My question is to those who do make their clients sign some sort of payment contract before starting a job. Do you make your repeat clients (those who give you regular work) sign and fax back a contract for each and every job the give you, or do you just have them sign one contract that encompasses all jobs that the client may send you in the future?

After recent events, I'm quite certain that I will have my clients sign some sort of agreement in the future before starting a job, but I just wondered if clients who send lots of work would find it annoying to have to sign an agreement every single time.

I look forward to your responses.

Cheers,
Crystal


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