Business question on late payments

[Deville]

So I'm in my second year of running my biz and I'm getting really frustrated with one aspect of it. I'm dealing with multiple company's. Some which pay me within 30 to 45 days, and others that stretch it to 3 - 4 months at a time.

I know they will pay me, but they stretch it so far sometimes it is becoming really difficult to operate. My invoices say on them, due in 30 days. I've tried calling them and hounding them about it but it does not seem to do much.

I'm thinking my only option would be to charge them interest on late payments, but I'm not sure if I legally can? Also, if it is legal what percentage could I charge?

Any other suggestions would be appreciated aswell,

Thanks

BTW, my company is Inc. if it matters.

[403lam]

offer a 2% discount for paying within 30 days. Or get a better a/r clerk that will help you with collectibles.

[adam c]

lots of companies charge interest for late payments, also report them to the credit bureau as it will affect their business credit score

[HHURICANE1]

A lot of businesses charge 2% per month after 30 days. Look on some of the invoices you receive, I'm sure some of them say something like that on them. It probably won't stop them going over but it is worth a try.

[Jlude]

Happens all the time to me... I have one company (small) that pays within a couple of days... others that take forever.

[Chandler_Racing]

Originally posted by adam c
lots of companies charge interest for late payments, also report them to the credit bureau as it will affect their business credit score

That's about the last thing you want to do unless your goal is to piss your client off.

[Marsh]

offer incentives to pay early, otherwise just charge interest for going over the stated due date...act like a credit card company

[adam c]

Originally posted by Chandler_Racing


That's about the last thing you want to do unless your goal is to piss your client off.

Have you ever looked at a business credit report?

[Weapon_R]

You can legally charge up to 60% interest/yr on outstanding balances. Most places charge about 2% per month.

[Graham_A_M]

You can also place a lien on the business, but thats a drastic resort, and not to be taken lightly. Its also very time consuming, and will most certainly place an enormous strain on the relationship between you and the other business in question.

I'd recommend charging significant interest on overdue accounts and make sure they are WELL aware of that new policy.

[Chandler_Racing]

Originally posted by adam c


Have you ever looked at a business credit report?

I've audited probably 25+ company's AR / AP accounts. In doing so you look in depth at collection risk. Also seen countless credit reports and dealt with several large credit and collections departments.

Reporting people is not how you deal with collection issues. Many vendors stretch payment terms to 90 days, so considering that receivables turn every 40 days is pretty reasonable for organizations who do not deal in cash. Consider it more of a cost of doing business (and yes I know it sucks for the little guys who have cash flow problems).

The best method is to offer discounts for quick payments (i.e// 2 / 10 net 30) or to stretch your own payment terms in the event it is a reciprocal transaction. People often have interest charges built into the contract for late payments, but very few vendors will pay this.

Sending collections or putting a black mark on a credit report is a last resort that should be used only after all other means are exhausted.

[Mikaldor]

A good AR person can typically get you on a quick pay list for the company and get your payments in within the 30 - 35 day period.

We started following up on invoices as soon as it hits 30 days and found that a quick call to check is sometimes all that it takes to get a check cut.

We have a 3% per month interest rider on our invoices, but never resort to it in 99% of our invoices. And our average AR is currently at 32 days.

[ExtraSlow]

Slow payments are a pretty common issue. As a guy who approves vendor invoices, I've seen it stretch past 60 days on probably half the invoices I deal with. I've never had a vendor charge me any kind of penalty, even if the invoice is over 120 days old.
A quick pay discount does help. Even 1% is enough to get my attention and move an invoice to to top fo the pile.

[Jason Lange]

I see the same thing in my business and honestly I rarely charge the stated 2% because the client either won't pay it or they will be pissed off. I think you just need to get used to it, alot of business' now are holding onto the capital they have for long periods to collect the little money they can on it from the bank. Just be glad the companies are paying it eventually. I have a couple clients that haven't paid since last September and are trying to negotiate 50-60 cents on the dollar now. Needless to say we are going to court.