If you have customers who consistently don't pay on time, you're essentially extending an unauthorized loan. Without providing some sort of consequence for overdue invoices, your customers won't always see paying you as a priority. By charging a late fee, you are motivating your customers to pay you on time and in full. We know not all customers are the same, so Late Fee Manager gives you a lot of flexibility on how and when to charge for overdue invoices. Let's go over the options:
Late Fees vs Service Charges
We use two different terms when referring to fees charged to a customer, Late Fee and Service Charge.
- A Late Fee is a flat fee, like $25. If you are charging your customers a late fee, all customers will be charged the same amount per overdue invoice, no matter how much the invoice is for.
- A Service Charge is a percentage of the overdue balance, like 2%. If you are charging your customers a Service Charge, each customer would have a different fee amount, depending on what their overdue amount is. For example, lets say you were charging a 2% Service Charge. A customer with a $150 overdue invoice would get a $3 service charge, while a customer with a $500 overdue invoice would get a $10 service charge.
You also have some choices on how to charge your customers. You can charge a Late Fee only, a Service Charge only, a Late Fee and a Service Charge, or the greater of the two. You can see more examples of how these options work here:
Scheduling your Late Fee Policy
You know your customers better than we do, so we want you to tell us who should receive fees, and how often should they be charged. You have the option to send fees to all customers who have overdue invoices, or you can choose to charge only a select few. We also give you some options for customizing when your customers will receive a fee:
- Grace Days refer to how many days after an invoice becomes overdue should a late fee be charged. This is particularly helpful if you want to give your customers a few days to settle up before charging an overdue fee.
- Fee Recurrence tells us how many days after a late fee has been charged should we wait before charging another late fee. You can also turn this option OFF if you only want to charge a late fee once.
You can see more examples of these options here:
It's always a good idea to check with your attorney before setting your Late Fee Policy. Rules and regulations can differ, depending on where your business is located.