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Interest to Clients

Hi! Do any of you charge interest to your clients who don't pay by the due date? If so, do they pay it and has it hurt your relationship with them? Any feedback on this would be helpful.

Thanks,

Barry J. Owens
Controller

We send out monthly statements with interest at 2% monthly or 24% annually. It's steep but often gets people's attention and we don't make everyone pay it. Some of our clients are honest and just pay it when they send their check, knowing they were late. Some don't pay it and depending on how often they pay late we may just forgive it. Or if we decide we want to collect the interest, we simply apply the payment as if they intended to pay the interest, leaving a balance owed on the original invoice in the amount of the interest we applied. I have rarely if ever had a client complain about this practice. If a client does ask me if they have to pay the interest I simply explain that we have to cover our costs and we've had to borrow money and pay interest on our operating line to cover their account and we need to be compensated. I definitely wouldn't let it ruin a client relationship. If they balk at paying it, I'd drop the interest and consider asking to be paid up front for the next project.

Lucia Mumm,
Operations Manager
Full Circle Creative

I have only charged interest one time to a client -- which was delinquent by almost a year! Of course, they were no longer a client when they refused to pay. I did collect everything that was owed, plus interest once a letter from legal council was received by the client.

With the exception of that, I have never charged clients interest. It is written in our agreement with each client that we will charge interest after 30 days so we could. However all of our clients pay within about 30-45 days so I don't feel I can complain! If it means they would be irritated about it and they pay fairly promptly anyway, I don't feel it's necessary. One thing you may want to do is to go ahead and run your client statements showing interest, but let them know that if payment is received in a timely manner, you will "wipe out" the interest charges. That way they feel you're helping them out.

Jody Breiland McClenahan

We charge 1.5% on a monthly basis and we state it up front when the client signs off on an estimate. We have been charging this finance rate for 15 years and so far no one has complained nor has it hurt any relationships with our clients.

Deb Harrington
Princess of Power
in10city
www.in10city.net

No, we do not. But we had a client that we did charge interest because they were so delinquent (almost a year!!). They paid it all in full.

Christine Wardwell
The Phillips Agency

We don't try to charge interest unless the relationship has gone bad and we are at the collection stage. We put an interest charge in our contracts that state that interest can be charged after 30 days. We haven't been too successful in collecting interest. In a negotiation it is usually one of the first items to be removed. I wouldn't pay interest to someone we owed unless I really had to. It is good to have it in your contracts in case you have to sue someone. Otherwise it is tough to bring up later.

Bill Scarpa

We will add interest if past due then note "if paid promptly, disregard the interest". That usually works. Most of our clients pay on time, some totally disregard the interest added.

Carol E. Davison
Exec. Director
Davison Advertising

Barry --

We have never done that. I know how I feel about suppliers that do that to us. It does hurt our relationship. It sends a message to me that our business isn't as important to them than a few percentage points for being a couple days late on a payment. If it's up between two different suppliers with equal abilities and one is uptight about timely payments, I'll choose the other.

However, on the other hand. We respect our suppliers and pay them in the same timely manner we expect to be paid. If I have a client who doesn't pay on time. I call them for payment. And I look for ways to replace them if it becomes too consistently painful.

Good luck.

Best Regards,

Steve Deiters,
Creative Department (of America)

No. We don't charge interest to our clients.

Johnson J. Paul MBA CGA
Controller
Campbell Michener & Lee Incorporated