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Late paying clients: how to apply late fees
Thread poster: Hannah Davis

Hannah Davis  Identity Verified
United States
Local time: 18:13
French to English
+ ...
Mar 10, 2016

Hi everyone,

I'm sure many of you have experience with this issue, but I have a few clients who often pay late. They always end up paying eventually, but the extra time it takes to chase payment and the cash flow issues late payments cause me are a real drag.

I wanted to know how you would approach the issue of applying late fees with clients and also, what schedule of fees do you use when applying these fees? Also, do you calculate late fees as a percentage interest on the total of the invoice and do you calculate the interest on a daily or monthly basis?

Sorry for the barrage of questions - any help much appreciated!

Regards

Hannah


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Anton Konashenok  Identity Verified
Czech Republic
Local time: 01:13
Russian to English
+ ...
Policy may vary, the main question is making it work Mar 10, 2016

Whatever late fee policy you implement, it's only as good as the client is willing to pay these fees. Unfortunately, most slow payers and non-payers would respond to your late fee demands with no more than a wicked grin. The only situation where it can work is when you have these fees written into the contract in advance.

On the other hand, you may consider raising your rate but giving a discount for prompt payment, so that good payers would still be paying your current rate, as opposed to the bad ones. While financially exactly the same, this arrangement tends to carry the message across somewhat better.


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Tim Friese  Identity Verified
United States
Local time: 18:13
Member (2013)
Arabic to English
+ ...
Agree with Anton Mar 11, 2016

This one has been discussed extensively on Proz in the past. The same clients who pay late or don't pay late are the ones that you would have to take to court to enforce a late fee. Is it really worth it? A better option might be to more choosy about who you work with and try to avoid non-payers/late payers.

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Laura Kingdon  Identity Verified
Canada
Local time: 19:13
Member (2015)
French to English
+ ...
Agree with Anton and Tim Mar 11, 2016

It's really hard to enforce those kinds of fees. Personally, I just don't work with perpetual late payers unless there's some compelling reason to keep them as clients (and there rarely is, since better clients/agencies tend not to do this kind of thing in the first place). I would send them an email saying you're not willing to work with them any longer and explaining exactly why, leave an honest review on the Blue Board, and then never worry about them again.

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Sebastian Witte  Identity Verified
Germany
Local time: 01:13
Member (2004)
German to English
+ ...
There are no simple solutions to the problems that constitute life and business Mar 11, 2016

There are no simple solutions to the problems that constitute life and business. I would assume that once you have lost too many customers because of overly strict cash flow management practices and enforcement procedures and have to leave the translation industry as you can no longer pay the rent/loan instalments for a flat that is both generally suited and large enough to accommodate a home office now that you have realized that new regular clients are very hard to obtain and will most probably show the same problematic features as your present, slow-paying ones anyway (with both the actual translation industry and non-industry customers of translators ordering translations alike being prone to being slow to pay, even if they do not necessarily ever become insolvent), you will regret having followed seemingly obvious advice.

I would also assume that, if you have to leave the translation industry as you can no longer pay the rent/loan instalments for a flat that is suited and large enough to accommodate a home office because your cash flow problems due to slow payers have become too severe, at some point you will regret not having tracked due dates of your invoices.

To keep a long story short: 1) Balance your approach and options carefully and individually and be sure to use your own head in the process, as it is a strong and powerful racehorse in the Ascot race that is life; 2) the tone makes the music when sending reminders for payment (it is an art in its own right, if you will) and, even bearing that in mind, and implementing it as well as you possibly can, the problem remains quite hard to get under control, even for top-performing translation service providers and translation outsourcers with pretty good people management skills (our Blue Board rating in regard to payments made on account of work sub-contracted is 5/5).

So what is the actual advice I can give? What is the new thing here, then? It is this: be sure to cultivate the art of "survival in an orderly, organized manner", analyze your own situation thoroughly and put it in perspective in regard to the market and see what your actual options are in that market realistically, and stay on top of your game to the fullest in all aspects of the "game" that is running a translation business (and handling people!) professionally (for a living, that is), and eventually you will succeed.

The better you do in that game of life and business (business = life) on the whole, the less dependent you will be on customers paying right away after the first reminder due to the economic leeway you then have, the gentler you can phrase the reminder, the more business you will receive from the late payers.

There is no simple advice and there is no simple solution. I am sure about it now that I got knocked down on a number of occasions when I followed simplified advice.

As regards the statement that late fees do not work with those among one's late payers that are also difficult customers, yes I can confirm that. They simply do not pay such fees. I can also say that the latter do not pay dunning fees (charged when sending a final and formal reminder after the initial softer and friendlier, slightly more informal reminders). But: not all late payers are also difficult customers! Some may simply not have an easy life/standing in business themselves, without being difficult people by nature. Some may simply be disorganized in terms of their management of invoices received and tracking their own invoices sent to their customers, even when they rake in quite a lot of money eventually from their customers over the financial year.

[Edited at 2016-03-11 20:11 GMT]


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Rita Pang  Identity Verified
Canada
Local time: 19:13
Member (2011)
Chinese to English
+ ...

Moderator of this forum
Exactly Mar 11, 2016

Sebastian Witte wrote:

As regards the statement that late fees do not work with those among one's late payers that are also difficult customers, yes I can confirm that. They simply do not pay such fees. I can also say that the latter do not pay dunning fees (charged when sending a final and formal reminder after the initial softer and friendlier, slightly more informal reminders). But: not all late payers are also difficult customers! Some may simply not have an easy life/standing in business themselves, without being difficult people by nature. Some may simply be disorganized in terms of their management of invoices received and tracking their own invoices sent to their customers, even when they reek in quite a lot of money eventually from their customers over the financial year.


If you have trouble trying to get them to pay, I doubt that they will pay you such fees.

Honestly...once you manage to recover your money, move on. It's not worth your time.


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Nikki Scott-Despaigne  Identity Verified
Local time: 01:13
French to English
Be explicit from the start Mar 11, 2016

I had problems in the past with clients taking it upon themselves to pay 30 days later than whatever had been agreed to. There comes a time when you decide not to work with those clients any more. Clients are simply sometimes failing to face up to the fact that their business is not profitable any more, or they too could be having problems getting paid. It comes down to whether you are prepared to be their banker or not. For me, it's not. Not any more.

As already mentioned by others, the first golden rule is to make things clear from the start:
- agree on the payment deadline
- agree on the consequences of failing to meet that dealine
- have a written trace of the terms agreed (you may need to prove it later)

Second rule, in order to be taken seriously, is to apply those rules you agreed on at the start. In practical terms, send a reminder pointing out politely but firmly that :
- payment is overdue
- if payment is not received within X days, then interest for late payment as set out in the terms and condition will be applied at the rate of X% per calendar month.

If your client still fails to pay, send another reminder, (with some official recorded delivery) with an updated version of the invoice with the penalty applied. Don't forget to indicate that interest shall continue to accrue at the rate of x% per calendar month etc. The honest ones who are in difficulty may pay up at this point. If they are honest and you get the impression that they are in difficulty, some payment is better than none. It may be be the right time to suggest partial payment. I have found that one third immediately to show their good faith (and to get something in) with the following 2/3 and 3/3 one and two months afterwards. You may prefer half immediately, half the following month, whatever. If you think they are going under, aim for no more than half now, the ohter half later. Again, have this all in writing somewhere.

Statutory provisions apply in some states, countries to the effect that in the event of no such terms having been agreed, then the statutory rate of Y% will be applied after Y period overdue.

Beyond that, then other choices may come into play. These might include :
- dropping it if the sum is not worth it and striking the client off your client list
- seek the services of a debt collection company, usually expensive but not always
- undertake various formal steps yourself.
In many jurisdictions, there are legal means of entering a judgment debt against a client for little or no cost. THis often enables you achieve the same ends as you would if you were to use the services of a debt collector, without the fees.

Dropping a client is always a hard thing to do. However, keeping a bad payer on your client list is much more heartache than its worht in the long run. Another thing you may wish to consider is to ask for 30% upfront. This can be used with new clients and/or bad payers. Good clients consider it a minor hassle at worst, but may well accept. Chances are these clients will not be the bad payers. There comes a point when you simply have to drop the bad payers. At worst they will insult you, but just remind them that they are the ones in the wrong, then take action to recover your due.

Promises don't pay the rent, nor do they put food on the table. Honest, organised clients do. They are the ones you want.

[Edited at 2016-03-11 16:43 GMT]

[Edited at 2016-03-11 16:49 GMT]


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Sheila Wilson  Identity Verified
Spain
Local time: 00:13
Member (2007)
English
+ ...
Some things I've done and will no doubt have to do again Mar 11, 2016

I won't repeat the advice already given, and I've never bothered trying to apply late fees - apart from the time I sued a client (very successfully) and the court in France more of less insisted on them. But here are some of the measures I've taken with "won't pay" clients, leaving aside those who simply can't pay as they're failing and those good clients who simply lost sight of the need through poor organisation - often it's the December invoices that get overlooked in the haze of the silly season.

- Something I systematically do (for unwilling rather than forgetful clients), is refuse to translate/revise even a single word until payment has been received in full. I'd have thought that would apply to every single translator, but it appears from these forums not to be the case.

- For a client in another EU member state, I once prepared an EU Payment Order on-line, saved it as a PDF and sent it to the client, telling him that I'd be submitting it to the courts on xx/xx/xx. He could see I wasn't going to just go away and he paid immediately.

- I did once use my Intellectual Property Rights as an excuse to contact an end client, having already warned my client of my intention. This was partly because he was claiming that he couldn't pay as he himself hadn't been paid (as if that was relevant), and partly because the translation was on-line for all to see. It had the desired, and immediate, effect but it wasn't pleasant and I wouldn't really recommend it.

I've never needed to call in a recovery company, but I would certainly first get a written quote then stall for a few days, because I would immediately pass it to the client. As with my EU client, I believe that most bad agencies are hoping that you'll just get fed up and go away. They don't want a court order against them or the heavies knocking on the door. They're just bullies in the main, and the more they get away with it, the worse they become.

Fortunately, after struggling with the problem for a good 15 years (yes, it isn't a new one, believe me!), I now have a lovely set of clients who I invoice monthly, allowing them 30 days to pay. The last February invoice got paid today, and two had been paid by 3rd March!


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Nikki Scott-Despaigne  Identity Verified
Local time: 01:13
French to English
Experience Mar 11, 2016

Sheila Wilson wrote:

"- Something I systematically do (for unwilling rather than forgetful clients), is refuse to translate/revise even a single word until payment has been received in full. I'd have thought that would apply to every single translator, but it appears from these forums not to be the case."

You can refuse to accept further work until outstanding work has been paid. For newbies and big job, I get 30% upfront and don't start until it's in.

- For a client in another EU member state, I once prepared an EU Payment Order on-line, saved it as a PDF and sent it to the client, telling him that I'd be submitting it to the courts on xx/xx/xx. He could see I wasn't going to just go away and he paid immediately.

"
is was partly because he was claiming that he couldn't pay as he himself hadn't been paid (as if that was relevant)..."

A common excuse, which is a non-starter, as the translator's contract is with the entity that ordered the translation. No privity of contract between the client of the client. End of story. However, it could be a fact that they need the money in before they have the means ot pay you. In an honest world, they should not order work if they cannot pay for it, irrespective of what happens on their side further down the line. When this happens, I make sure I get the money in and then don't work for them again.

/quote]


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Andrea Garfield-Barkworth  Identity Verified
Germany
Local time: 01:13
Member (2015)
German to English
Out of interest.. Mar 12, 2016

How do you define late? In days, weeks or months?

When do you send the first reminder?


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Sheila Wilson  Identity Verified
Spain
Local time: 00:13
Member (2007)
English
+ ...
My definition varies Mar 12, 2016

Andrea Garfield-Barkworth wrote:
How do you define late? In days, weeks or months?

When do you send the first reminder?

A new client whose payment doesn't arrive gets a polite reminder immediately i.e. next day. One who has been tardy before gets a few days but less than a week. Further reminders follow at weekly intervals, getting increasingly formal. For a previously good client, it depends. Sometimes, I don't say anything for a few weeks, which is too long but it isn't easy when you have a good relationship. Fortunately, the reminder normally results in apology and immediate payment - just an oversight.


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Helena Chavarria  Identity Verified
Spain
Local time: 01:13
Member (2011)
Spanish to English
+ ...
Well done you! Mar 12, 2016

Sheila Wilson wrote:

Fortunately, after struggling with the problem for a good 15 years (yes, it isn't a new one, believe me!), I now have a lovely set of clients who I invoice monthly, allowing them 30 days to pay. The last February invoice got paid today, and two had been paid by 3rd March!


I always ensure I have enough money in the bank to last me at least three months, including VAT and income tax payments.

So far this year I've issued a total of 13 invoices (six in January and seven in February) and received payment for five of them (all direct clients, who I invoiced on 29 February). I'm owed nearly €3,800.

Businesses often pay on the 10th of the month, which is why I've decided to wait a few more days before I send reminders. I don't enjoy asking people for money, even when it's mine.

And as for applying late fees, I really don't think it would work and I agree with what other people have written: it's more common to apply a discount for early payment. Though that's also something I never do.


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Rita Pang  Identity Verified
Canada
Local time: 19:13
Member (2011)
Chinese to English
+ ...

Moderator of this forum
.. Mar 17, 2016

Sheila Wilson wrote:

A new client whose payment doesn't arrive gets a polite reminder immediately i.e. next day. One who has been tardy before gets a few days but less than a week. Further reminders follow at weekly intervals, getting increasingly formal. For a previously good client, it depends. Sometimes, I don't say anything for a few weeks, which is too long but it isn't easy when you have a good relationship. Fortunately, the reminder normally results in apology and immediate payment - just an oversight.


Much like what I usually do as well! I am a bit more lenient in terms of time. I usually give them about 3-5 days before sending a reminder. I recently had to remove a positive BB entry I've given a while ago as the agency no longer deserves the comment I've left for them, which was unfortunate. Sometimes you do have good clients who ended up becoming so-so...this was the case.


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Turdimurod Rakhmanov  Identity Verified
Kyrgyzstan
Local time: 05:13
Member (2014)
English to Uzbek
+ ...
Choosy about clients Mar 31, 2016

If they pay 1-5 days late, it is OK for me, my usual clients always pay on time, late payment happens when I start working with new clients, but I sort them out and choose which clients are worthy to work with. Serious clients always pay on time.

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Samuel Murray  Identity Verified
Netherlands
Local time: 01:13
Member (2006)
English to Afrikaans
+ ...
What other people said Mar 31, 2016

Hannah Davis wrote:
They always end up paying eventually, but the extra time it takes to chase payment and the cash flow issues late payments cause me are a real drag.


Threatening them with a late fee will not make them pay quicker.

And you can't apply a late fee unless the late fee was agreed upon beforehand... unless perhaps the state in which you live has set statutory late payment fees (find out!).

Also, do you calculate late fees as a percentage interest on the total of the invoice and do you calculate the interest on a daily or monthly basis?


You must distinguish between late payment interest, late payment penalties, and late payment costs.

Costs are fixed amounts that relate to the actions you have to take to initiate the late payment procedure, e.g. the cost of writing the letter and the cost of sending it by post, or the cost of appointing a collection agent. However, these often only kick in when the payment is very, very late, and you've reached the point where you're no longer simply e-mailing the person. In some countries (e.g. the UK) these costs are set by and limited by law.

A penalty can be calculated as a percentage of the amount owed (the IRS does that, for example), but for the amounts that we work with, I think a fixed one-time penalty fee would work better (e.g. your usual minimum fee). Note that you can't apply a penalty unless the penalty was agreed on beforehand by the client.

Interest is best calculated daily, starting from the date that payment was due. This is generally not worth fighting over, because even if the interest rate is 10% (it may be set by the laws of the state in which you live), and the client is 15 days late on a USD 500 payment, the total interest would be about USD 2.00.

The "due" date for late payment interest is the date that was agreed on beforehand (e.g. "14 days after invoice date", "end of calendar month following invoice", etc). If nothing was agreed on beforehand, then (depending on your state's laws) the official "due" date may be up to e.g. 30 days after the date on the invoice. The "due date" that you write on your invoice is simply a reminder and is not enforceable if it wasn't agreed on beforehand.


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