I’ve was burned by clients in the past. I’ve had those times to where I worked with a client and delivered on what we agreed on, however, they were late on a payment. I don’t mean late by a couple of days; I mean weeks and then weeks turned into months.
To try and stop the trend of clients making late payments I added late fees to my client agreement. Even though every client knows late fees are a possibility because it is in the client agreement they signed, I’ve been unsuccessful in collecting late fees. This led me to ask myself a question:
What is the overall goal of charging late fees?
Late fees are not an incentive
People respond better to encouragement than they do penalties. We all know that we’re not supposed to go over the speed limit, and the penalty for going over the speed limit is a speeding ticket. We all still drive over the speeding limit. I wonder, what would happen if we were given money for obeying the speed limit?
I realized charging late fees was using a fear tactic instead of encouragement. The hope was the late fee would serve as a deterrent for clients to pay. If I can barely get a client to pay $1,000 what makes me think that I can get $1,200 from the same client. Something I’ve tried before is to reward the client for paying early in the process.
For example, I may say to a client “if you pay in full today you will get a 10% discount on the work, however if you decide to spread out the payments there is no discount.”
This method is an incentive to pay with no fear tactics are involved, and the customer has a choice, but both choices involve paying you.
When a client does not pay after you have delivered the work, it’s very easy to get frustrated or angry. Do not let your anger take the form of a late fee. If you’re angry, you should not make business decisions out of anger. Most of the time this is going to result in you enabling business practices that create a bad perception of your company and brand. If someone does not pay on time and is very late, don’t try to penalize them. Try to think of ways in which you can make paying what they owe easier.
Is it easy to pay you?
This question is aimed at your overall payment process. The goal is to remove any barriers that may hinder the client from making a payment in a quick manner. Using online payments systems is an absolute must. Payment has to be so easy all the client has to do is click a button to make a payment.
If you work in an industry in which you most absolutely have to have a check, once again make it easy. At the least you should send your client a self-addressed envelope that is already stamped and paid for, so all they have to do is drop the check in the envelope and put it in the mail. Or set up an online payment gateway that can process electronic checks.
Have you reached out to the client?
Before charging late fees have you taken the time to reach out? When I say reach out, I don’t mean you sent an email the day the payment was due. Give the client a couple of days to make a payment; perhaps they may be busy with other business or personal things that are going on.
Three to four days after the payment is due if they have not yet made a payment send them a reminder email as well as a link where they can easily make a payment. If two or so days go by, and they still have not made a payment take the time to reach out and call them. Make sure you are kind and courteous on the phone call and see if they need any help walking through making a payment and double check to see if they even noticed your email. Do not immediately jump to the conclusion they are ignoring you. I have learned that it’s easy to assume that the client is not paying, but you as the creative professional have to use every method of contact to remind the customer about the payment.
Avoid late fees all together
The best answer on whether or not to charge late fees is to avoid this issue altogether. Everything about charging late fees can be prevented if you were to collect the full payment upfront. Receiving the payment upfront removes many of the things that I mentioned prior, and you don’t have to worry about reminding someone because you collected everything you needed before working. The only thing that would be left for you to do is to deliver what you promised.
If you’re able to go this route to collect all payment upfront be watchful for scope creep and use revision cycles. This goes without saying, but I will say it anyway: no matter how you set up your payment structure, whether full payment or payment plan if the client does not pay then do not work. Let the client know if they do not pay work will cease and is important for you to hit the deadline and to meet the deadline, payments have to be made promptly.
So what’s the verdict?
I’ve learned through many personal experiences and professional experiences in my business it is not best to charge for late fees. If the client is aware of the process and is open communication and the client knows that if you do not get paid their project will not be completed then they will be at they were full then they will reflect your level of professionalism and will be more inclined to pay you on time.