• Finance

How to charge late fees when clients don’t pay on time

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It’s happening again. You agree to take on a freelance gig, and when the job is finished, you send them an invoice. But after the due date has past, you still haven’t received your money. You don’t know what the hold up is, but it’s annoying and stressful to not know when, or if, you are getting paid.

As a freelance writer, this used to happen to me all of the time. And usually if I pestered the company, I’d hear some lame excuse like “Our bookkeeper is on vacation right now!” or, “Ohh, the check must have been lost in the mail!” Or, more often, I’d just hear crickets until they randomly decide that they are able to pay me.

Chasing down payment can be one of the worst parts about being a freelancer. But the good news is, there are professional ways to encourage clients to pay on time. One of the easiest things you can do to deter late payments is to think like a rental store and start charging late fees.

A step-by-step guide to late fees

1. Start by specifying a late fee in your contracts and on your invoices. The amount doesn’t have to be large – one typical fee is 1.5% of interest per month after the payment due date. Even though the amount sounds small, it’s an incentive for clients to pay up sooner rather than later.

2. Make sure your invoice clearly states when their payment is due. This is often marked as Net 15, (payment due within 15 days of service), Net 30, or Net 60. The invoice should also include the present date (for tracking lateness) and all of the information your client needs to pay promptly, such as your full contact information, instructions for sending payment, your tax ID number, and an itemization of services.

3. As soon as your freelance gig is done, send an invoice promptly. Make sure they receive both a paper and electronic copy.

4. If you don’t get paid, send another invoice that reflects your late-payment charges. Include a note on the invoice such as “Second notice – 30 days past due.” Keep following up until you’ve established a payment plan or received your money.

5. If you’ve done everything you can and a client still isn’t paying, you may want to take the issue to the next level, by hiring a lawyer (first to send letter or make a call) or collection agency, or going through small claims court.

If the client is in NYC, you may be able to file a claim under the Freelance Isn't Free law.

More tricks to avoid nonpaying clients

Many freelancers ask for a certain amount of payment up-front, or they offer a discount for early payment in full. We've talked more about these strategies here.

Freelancers, do you use late fees in your business?