Steep Fees to Penalize Late Payment

Posted by Obed Fernandez on

If you have trouble getting your clients to pay on time, one recommended approach is to put serious penalties for late payment into your contract. For instance, this fellow named Samuel charges an eye-popping ten percent per week!

10% per week, every week, starting from the first day that the invoice is overdue. 
Check out the full blog post at

Late fees are critical. In some businesses the accounting department will manage debt by paying off vendors in the order of who charges the most interest. If you don't have a late fee, you get shuffled to the bottom of the pile and stay there. Accountants are generally hardwired to avoid penalties, so if they see there are penalties they'll pay before the penalty period (provided they have the money).

If your late fee is very high, such as the example cited, then they will simply pay the invoice and "forget" the late fee. Then you're left squabbling over the late fee, which is quite annoying. 

The author of the linked blog post lives in Australia, where laws on such matters are different than the USA. You should consult your own lawyer before implementing your late fee scheme, just to make sure you don't run afoul of local regulations. In general, anything that the client agrees to and signs in the contract should be fine, but better safe than sorry.