Question about charging interest / processing fee for late payment Thread poster: Maureen Stewart
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Hello - I was wondering if anyone out there ever charges interest for late payments - AND - a fee for having to send a reminder. If so, how do you do it?
Most of the freelancers here in Austria that I know don't bother for fear of damaging the relationship with their clients.
Here is my situation: the customer is long term and always pays...eventually. The work is also interesting. They are generally between 4-6 weeks late, sometimes longer, and the sums are rather lar... See more Hello - I was wondering if anyone out there ever charges interest for late payments - AND - a fee for having to send a reminder. If so, how do you do it?
Most of the freelancers here in Austria that I know don't bother for fear of damaging the relationship with their clients.
Here is my situation: the customer is long term and always pays...eventually. The work is also interesting. They are generally between 4-6 weeks late, sometimes longer, and the sums are rather large. Despite having gone around and around with them on a friendly to stern-but-friendly basis over the years, nothing has really changed. Of all my customers they are also the only one to occasionally claim not to receive some of the invoices I send - which I presume is not true (or maybe it happened once, but certainlyl not 3, 4, 5 or more times). This is compounded by the fact that they insist on their invoice being sent by snail mail, so I invariably end up having to spend my time waiting in line at the post office to send the reminder(s). All of this is annoying to say the very least and is, as far as I can tell, down to one particular person in the office, the one who handles payment of invoices.
Now, as far as I know we are technically allowed to charge a certain percentage above the current Euribor rate per annum. Because it is a per-annum charge rather than a one-off fee this really doesn't amount to much, even for bigger invoices (unless my mathematical skills have completely left me).
This is why I am wondering about the legality of charging a flat-rate fee in addition to the interest - you know, something like a processing fee. If some of the big mobile communication and utility firms out there are allowed to charge a fee simply for having to issue a paper invoice, don't we freelancers have some sort of leeway in charging fees for something similar?
Your comments and suggestions would be enormously appreciated (in German or English!).
Cheers! ▲ Collapse
| | | | Russell Jones 
United Kingdom
Local time: 12:13
Italian to English
| English only please | Sep 9, 2009 |
Just a reminder that site rules require replies to be in English in the English language forums.
Thank you everyone.
[Edited at 2009-09-09 09:01 GMT]
| | | | urbom
United Kingdom
Local time: 12:13
German to English
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| Find out about Austrian legislation implementing EU directive 2000/35/EC | Sep 9, 2009 |
There is an EU directive on combating late payment, no. 2000/35/EC, that requires EU Member States to implement its terms in the national legislation of each Member State.
In the UK, the directive was implemented via the Late Payment of Commercial Debts (Interest) Act 1998 and the Late Payment of Commercial Debts Regulations 2002.
BERR (the gov't dept which used to be known as the DTI) has put out a leaflet explaining th... See more There is an EU directive on combating late payment, no. 2000/35/EC, that requires EU Member States to implement its terms in the national legislation of each Member State.
In the UK, the directive was implemented via the Late Payment of Commercial Debts (Interest) Act 1998 and the Late Payment of Commercial Debts Regulations 2002.
BERR (the gov't dept which used to be known as the DTI) has put out a leaflet explaining the UK legislation and how to use it:
http://www.berr.gov.uk/files/file37581.pdf
According to this page http://ec.europa.eu/enterprise/regulation/late_payments/implementation.htm the relevant legislation in Austria is:
Zinsenrechts-Änderungsgesetz BGBI I Nr 118/2002
and
Änderung der Basis- und Referenzzinssatz - VO, BGBI II Nr 309/2002
See also this old thread: http://www.proz.com/forum/money_matters/38355-has_anyone_had_any_success_in_applying_directive_2000_35_ec_on_combating_late_payment.html
[edit: sorry about broken links!]
[Edited at 2009-09-09 09:10 GMT]
[Edited at 2009-09-09 09:27 GMT] ▲ Collapse
| | | | Heinrich Pesch
Finland
Local time: 14:13
Member (2003)
Finnish to German
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Of course you should send this client your new rules. After that you can charge for late payment and reminders.
A better way would to allow for discount. If they pay you within two weeks (as the EU requires by the way) they could reduce 2 percent off the bill. This works for penny-conscious clients.
I mention on every invoice that for late payment I charge 1 percent per month. This is the rate I have to pay for credit card purchases after the first invoice. And telephone operators, e... See more Of course you should send this client your new rules. After that you can charge for late payment and reminders.
A better way would to allow for discount. If they pay you within two weeks (as the EU requires by the way) they could reduce 2 percent off the bill. This works for penny-conscious clients.
I mention on every invoice that for late payment I charge 1 percent per month. This is the rate I have to pay for credit card purchases after the first invoice. And telephone operators, electricity providers etc. are very harsh and charge often a fix sum after your payment is delayed for a week, don't they?
This lazy payer, do they handle heavy machinery for smashing and screening, by any chance? Your scenario reminds me of one of my clients.
Regards
Heinrich ▲ Collapse
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| On the subject of discount offers and smashing machinery | Sep 9, 2009 |
You know, Heinrich, I had a discount offer of 2% in place with them for a time and they only took the bite on one occasion, so I guess they aren't too penny-conscious. As for smashing machinery, I haven't done that yet, but I'm afraid my husband - who says I should have begun charging them from the start - is going to begin invoicing me every time I bring up the subject again!!
| | | | Sheila Wilson
Spain
Local time: 12:13
Member (2007)
English
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| You can charge them what you like ... | Sep 9, 2009 |
... as long as you inform them before doing the work. Whether you'll ever receive work ane/or payment are still unknowns.
In France, it's now recommended for "proper" companies to apply interest to all overdue invoices. This is because, if the tax authorities do a spot check on your revenues versus tax returns, they will assume that you had applied them, as it's your right. In other words, if this happens a lot, you c... See more ... as long as you inform them before doing the work. Whether you'll ever receive work ane/or payment are still unknowns.
In France, it's now recommended for "proper" companies to apply interest to all overdue invoices. This is because, if the tax authorities do a spot check on your revenues versus tax returns, they will assume that you had applied them, as it's your right. In other words, if this happens a lot, you could find that your declared revenue will fall short of what the taxman calculates, with all the possible consequences.
This doesn't affect the smaller freelancers who simply have to declare what they physically got their hands on. ▲ Collapse
| | | | | 7% per month late charge | Sep 9, 2009 |
I charge (direct clients) a 7% surcharge per month as late charge. But, I have never had to apply it.
| | | | Paul Daubreu (X)
Local time: 13:13
French to German
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| Avoiding the hassle | Sep 10, 2009 |
I am about to implement a factoring system with one of my bank's partners. In other words, I will be selling some of my invoices to the factoring company and cashing the money almost immediately. The factoring company then gets their money from the client at the payment date... And if they don't, well, it will be too bad for the client as the interests for late payments are rather hefty.
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| I wish I did | Sep 10, 2009 |
Maybe I'm wrong, but every time a translator delivers a job to be paid "later", s/he is entering the money lending business. While I strive to be among the best translators, I'd be quite happy if I were rated as the world's worst lending institution.
At least in Brazil, if you go to a department store, a car dealership, or any place that sells expensive items, and don't have all the money, you want to pay that in installments, they have a local representative from a financial instit... See more Maybe I'm wrong, but every time a translator delivers a job to be paid "later", s/he is entering the money lending business. While I strive to be among the best translators, I'd be quite happy if I were rated as the world's worst lending institution.
At least in Brazil, if you go to a department store, a car dealership, or any place that sells expensive items, and don't have all the money, you want to pay that in installments, they have a local representative from a financial institution there who will process your loan immediately online.
If I go overdraft, my bank - the largest private one in Brazil - will charge me something close to 10% per month. Of course, it's high, because they don't know when I'll pay it back - normal fixed-term loans are lighter. But they are professionals in loans.
I'd be an amateur in the loan business, so entitled to do it badly. I'd raise my translation rates by 40%, and offer a 20% discount for payment in 30 days, and a 40% discount for COD, running for the worst money lending institution in the world, while still being a good translator.
Paul Daubreuil wrote:
I am about to implement a factoring system with one of my bank's partners. In other words, I will be selling some of my invoices to the factoring company and cashing the money almost immediately. The factoring company then gets their money from the client at the payment date... And if they don't, well, it will be too bad for the client as the interests for late payments are rather hefty.
Factoring is a great solution, Paul, if you can get it. A friend of mine has a factoring company, and I referred another friend who has a small translation agency to him. End of story is that factoring companies here don't handle such small transactions. ▲ Collapse
| | | | Paul Daubreu (X)
Local time: 13:13
French to German
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| A point subject to closer examination | Sep 11, 2009 |
José Henrique Lamensdorf wrote:
Factoring is a great solution, Paul, if you can get it. A friend of mine has a factoring company, and I referred another friend who has a small translation agency to him. End of story is that factoring companies here don't handle such small transactions.
Thanks for the hint, José. My dossier as such will be subject to a closer examination by the bank anyway and I am waiting for their comments and/or decision.
I gave this potential solution as the bank itself advertised for it and, frankly, if it works I will get a (sometimes heavy) weight from my shoulders. As it seems, my bank has no interest to see my professional account getting in the red and remaining there .
As per your post, I think you are right about translators entering the money lending business. The truth is that some (many?) translation agencies manage their cash-flow in a rather aleatoric way - that is, if they have enough cash to make it "flow" in any way. In such cases, I am afraid that incentives like discounts are rather useless.
| | | | | Bank taking over & cash flow | Sep 11, 2009 |
Paul Daubreuil wrote:
Thanks for the hint, José. My dossier as such will be subject to a closer examination by the bank anyway and I am waiting for their comments and/or decision.
I gave this potential solution as the bank itself advertised for it and, frankly, if it works I will get a (sometimes heavy) weight from my shoulders. As it seems, my bank has no interest to see my professional account getting in the red and remaining there .
Finance is outside my translation area of specialty, so I'm not at all familiar with banking systems outside Brazil, and have somewhat limited knowledge on my local services available. Here, handing your collections over to a bank and getting immediate credit for them seems to be something conceptually different from factoring as such, maybe in terms of collaterals
Paul Daubreuil wrote:
As per your post, I think you are right about translators entering the money lending business. The truth is that some (many?) translation agencies manage their cash-flow in a rather aleatoric way - that is, if they have enough cash to make it "flow" in any way. In such cases, I am afraid that incentives like discounts are rather useless.
It's not random, it's the planned cash flow game, which I often described, also in http://www.proz.com/post/1179284#1179284 , like this:
Unfortunately, too many fly-by-nite agencies worldwide have found this way to live on borrowed cash at no interest. It's a small-scale "translating version" of Bernard Madoff's ploy.
The trick is that they demand up-front payment from the end-client, and commit to paying translators in anything between 45 days from delivery with invoice to 60 days after the invoice date month-end. In this meantime, they have that money to live, pay bills, play the ponies, anything they want. They'll only need cash when the payment to the translator becomes due. Then they'll stall as much as they can. In the meantime, they've got other jobs rolling, so they have the advance payments from later jobs to pay long-past-due translators, as well as keep on living.
The risk is that some day business will decline, and the next job with its up-front payment won't be there. Then they'll default on payment on one translator, another, yet another, until their image (a series of LWA=1 on the Blue Board) is dirtier than an aviary perch, as we say in Brazil. When they can't take it any more, they change name, web site, and start over. Check the "see also" found on many Blue Board bad records.
| | | | Paul Daubreu (X)
Local time: 13:13
French to German
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José Henrique Lamensdorf wrote:
Unfortunately, too many fly-by-nite agencies worldwide have found this way to live on borrowed cash at no interest. It's a small-scale "translating version" of Bernard Madoff's ploy. (...)
I suspected that this method was in use, but you confirm it.
As per "factoring", I should have been more precise - this is a "kind of factoring", in which I will be able to select the invoices which I will sell to my bank's partner (my choice: invoices with payment deadlines over 30 to 45 days). As per collaterals, I understood that clients will be checked as per their creditworthiness, so the bank takes little risk. In other words, the bank will be granting me a credit line, the invoices being the collaterals.
So it is better to speak about "cession of claims" than about "factoring" per se.
It is also a good way to sort out wheat and chaff. Problematic clients would not accept that procedure anyway, that is if the bank accepts their invoices as collaterals for my credit...
[Edited at 2009-09-11 11:38 GMT]
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