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How to handle late charges?
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[Todd Terry] “Keep in mind that a handshake deal is just as legally binding as a contract written in stone, as long as it meets the three legal requirements for a contract: 1) offer, 2) acceptance, and 3) consideration.”
While true to a small degree, it is quickly refuted by…
[Todd Terry] “The only real difference is that a verbal contract is a lot more difficult to prove, if challenged.”
I have found ONE TIME where a verbal contract held up. Once. That is it.
Having a verbal contract is as good as no contract at all, in most every case.
I did business on a handshake for years — but the world is changing. It is a long way back to the dairy I grew up on where men shook hands and gave you their word and you knew it was written in stone because they would sooner lose a limb than break their word. That world is gone in most cases.
Relativism has become the order of the day.
Get a signed contract.
I realize that this seems to refute my post just above, but what I am talking about in each is a reflection on two different types of clients. In my reply to Walter, I am talking about working with your best long-term clients. (Wherein some have done business with you for so long and their word has proven repeatedly to be so good that the necessity of a contract is less of an issue.) But with anyone other than this “select elect” of the client list, avoid a contract to your own peril.
Verbal contracts rarely hold up in any kind of court action should you have to pursue the matter. Contracts are just smarter with the vast majority of situations.
Ron Lindeboom
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What you’re doing is fine.
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A contract, even a one pager, makes life a lot easier even for simple projects. Unless it is a one-off shoot arranged at the last minute with a reputable freelancer, I always do some form of a contract.
Stipulate the payment terms and get a signature. A paper trail is like the yellow brick road – at the beginning is Munchkinland (contract) and at the end is Oz (a check), which is the most important piece of paper of all, as that gets you home to Kansas. Hmm, I smell a blog brewing…
Mike Cohen
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This thread makes fascinating reading for some who’s not from the US.
What’s fascinating is that we have exactly the same problems with late payment here. And I thought all along that it was a cultural thing to be late with payments. Apparently its global, with some tenuous link with the state of the economy.
Out here, we don’t probably have as stringent laws as there are in other parts of the world regarding late payment, but ‘hiding behind the recession’ seems to be a universal thing. This is particularly difficult when one works with clients outside of one’s country.
What I’m beginning to explore is, instead of threatening to, or even carrying out a penal charge for late payments, one could invoice clients with a due date for payment maybe 30 days from invoice date. Then show a 10% discount if paid within that date. And maybe even a 20% discount if paid within 2 days? Sort of like rewarding sincerity rather than punishing dishonesty.
I know calling late payment dishonest is a bit harsh, but if you saw how some of these late payers lived their lives – cars, houses, country homes, expensive restaurants, business class etc. – holding back payment for someone’s labour gets pretty close to dishonest.
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Neil Sadwelkar
neilsadwelkar.blogspot.com
twitter: fcpguru
FCP Editor, Edit systems consultant
Mumbai India -
[Neil Sadwelkar] “…dishonesty…I know calling late payment dishonest is a bit harsh”
Sometimes, it is exactly the case. You don’t have to go very far back into the past to find many posts along these lines. There are clients who are late just on principle, to arbitrary exercise power and to remind you who is the boss.
Your idea is always my favorite. Make plain on the bill that there is a price for paying in advance, paying on completion, 30 days, 30-60, 60+, etc. Let them know EXACTLY what they can expect, get their signature, and there’s no ambiguity.
Not that this has any bearing on Kenton’s original question. 🙂 But good practice going forward.
tw
Tim Wilson
Creative Cow Magazine!My Blog: “Is this thing on? Oh it’s on!”
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Hi.
Here we can charge from 3-18 % on 30 days overdue. So it makes 0,1-0,6% a day.
Usually when you agree on job client gets the cost estimate and payment details i.e. due date and possible charges on overdue.
I usually bill overdue charges separately as we do not have VAT on interest charges.
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Margus
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