Should You Charge Late Payment Fees on Invoices?

Late payment is a common problem for small businesses. You've completed the work sent an invoice, and waited weeks, if not months, to get paid. Or at least heard of stories like this. Late payment is demanding in standard times, especially when times are tough. Not only does it become a financial burden but also an emotional one.

A standard solution to late payments is to charge a late payment fee. It’s the obvious solution. You push the client to pay you now, or they incur more costs further along the line.?

The Pros of Charging Late Payment Fees?

1. Helps you recoup some of the opportunity costs associated with late payments??

2. Gives you some negotiating power to get paid sooner??

3. May help you establish healthy cash flow practices for your business?

The Cons of Charging Late Payment Fees?

1. Can damage relationships with good customers??

2. May result in even more late payments??

3. You may not be able to charge interest on late payments in your state?

Conclusion: Ultimately, whether or not you charge late payment fees on invoices is a decision that should be based on your business goals and objectives. If your primary goal is to improve cash flow and reduce the negative impacts of late payments, then charging late payment fees may be a good option for you. However, if maintaining strong relationships with your customers is paramount, you may want to avoid charging late payment fees or at least use them sparingly.

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