With all businesses, finances need to be in order, and this means keeping track of individuals who are notorious for not paying on time. When it becomes a constant reoccurrence, you may need to take action and turn them over to a collection agency. Before it escalates to that point, however, consider imposing late fees. Here’s what you should know about late fees and why you might consider implementing them.

What Is a Late Fee?

With any transaction, there's typically a service charge. As a business, when you provide a service to your client and a contract is drawn up, there are guidelines on when payments are due. These should be made explicitly clear, so there is no miscommunication. However, some individuals might become delinquent because they are unable to pay their bills for whatever reason. When these situations arise, businesses can penalize clients with late fees. 

Why Should Your Business Charge Late Fees? 

Before contacting a collection agency, try and figure out why the client is unable to pay. It's best to work with the individual specifically to come up with ways they can get caught up on their payments. You can also provide potential service incentives if they make their payments earlier than required. This way, you maintain a positive business relationship and don't put a strain on any future dealings.

When choosing to charge a late fee, it needs to be something you have made clear from the beginning. With every client you work with, the late fees should be visible on the contract. On any invoices that the client gets moving forward, you can include a segment that discusses the fee.

When running a business, chasing down a client for payment is just one of the countless tasks that can distract you from what matters the most. Joseph, Mann & Creed in Twinsburg, OH, has nearly 20 years of experience and the collection expertise to handle all of your noncompliant clients with ease. To learn more about their services, visit them online, or call (216) 831-5626 to speak with a member of their dedicated staff. Follow them on LinkedIn for up-to-date news and information.