Not sure if the title reads correctly but a question for you.

A lot of companies state on their invoices/bills that 2% per month interest will be added to late payments and indeed i had it happen on a utility bill i thought i had paid but actually hadn't.
Anyway whilst arranging the invoice books for my business the printers said "make sure you put 2% interest charged on overdue accounts at the bottom"
So that is what it says, however i was wondering just how do you enforce it?
I mean i was chasing a late payment from a restoration company and said on my fax that 4% would be added as it was 60 days overdue. They just sent a cheque for the original amount.
Am i likely to take legal action to reclaim this $9? Obviously not so what is the solution, any ideas or anyone been in this situation?

I am afraid I do not know the answer, but would be interested to know what it is. Our contractors handed us terms of agreement (on the day we signed off..lol) that stated that unless we pay any invoice within 10 days we will be subject to interest at 1.5% per month.

I told them their terms were really tight - 10 days is not long is it!

If I pay late - I won't be adding 1.5% extra to it - maybe they just hope that I will?

It's one of these policies like 'Net 30' the enforcement of which is linked to your power over the purchaser of the goods or service. Can you impose a late fee? Yes of course. Can you ensure that it will get paid? No, probably not. Is it worth it? Only you can tell!

Utility companies/municipalities have a somewhat captive market and have easier/stronger ways to collect the overdue charges such as liens on your property. Private companies, as you have learned, do not have such leverage. If your services are required again you could refuse to deal with them but that could be cutting off your nose to spite your face.

If it forms part of the contract (i.e., if it was a condition imposed at the time the contract was entered into) then you would be able to sue for the interest. It is a judgement call for you to make as to whether you wish to pursue it.

For what it's worth, provincial legislation usually provides for the imposition of interest on debts even if the contract doesn`t provide for it. Check the Canlii website for your province under Judgment interest act.

Thanks, will have a look.

I know that if i hadn't paid my utility company they could have cut me off whereas i have already provided my service and for the few bucks in question you gotta wonder if it's all worth it.

Depends how important the customer is to you, most will suck it up. If you insist on collecting it, refuse to supply anything else until it is paid. Very few ever pay the interest. Should you have to take them to court, the interest is part of the agreement and can be included as a part of your claim, without this statement you could not claim it. Without it, in BC the Court Interest Rate act sets what you can charge, something like .25% pre judgment and not much more post judgment.

After 30 days we send out a statement, 60 days we phone up and 90 days put the account on hold. If the customer messes us around, we may refuse to supply them anymore or insist on pre payment. Don't waste your time with collection agencies on overdue accounts.

We are changing over to increasing our prices and giving a discount for payment within 30 days. We'll see if this works better. We have printed terms of sale, which covers most eventualities.

Added: If you put interest added on overdue accounts, you also have to put the terms of the invoice, COD, net 30 etc.

You would not normally expect to collect interest or late charges. It does provide some small incentive to pay if you send statements each month as the amount keeps increasing, but if someone is willfully not paying you it is unlikely to bother them all that much.

The value of such terms is if you have to go to court. Then you can ask the court to add the interest to the original debt. However, to succeed with this you will need to demonstrate that the interest is a term of the contract. To do this you will have to show that the customer agreed to this term when placing the order with you. Simply printing it on an invoice that the customer receives after the work is done will probably be ineffective.

It is unenforceable, it has to be in written terms & conditions in your catalogue or on an order form, the customer accepting this prior to placing the order.

I thought I said this above

Glad you took the time to mention that. Was that in billable hours?

Billable Hours

I don't remember seeing it in there.

So it would seem that in general this is a complete waste of time. I mean what's the point of putting it on the invoice and then threatening to add it if they don't pay up if it is pretty much unenforceable and particularly as my average bill to the customer is around $250.
I could just see it as lots of extra paperwork generating a new invoice each month with the 2% added when they will just pay the original when they want to.

Every now and then someone pays it. A lot depends on how bad they want what you're selling and how bad you want the interest. It automatically gets added onto statements for us and then if they pay we post it, if they don't there was no extra work involved. When the best you can get on deposit is around 1.2% pa right now, on $250 that is about 25c a month. When interest rates get back up to 15% then I might get more aggressive. Our receivables right now are pretty high, but only about 5% are over 30 days and all under 60, so not too big an issue.

I am hoping by putting up my prices and then offering a settlement discount we'll have more success in keeping everyone in line or making some money on those that don't. A settlement discount is also enforceable without being written in any agreement or terms other than the invoice.

How about charging 10% more then, 10% discount if paid in 10 days and 2.5% in 30.

Unless it is in the original contract, there is no point in putting it on. Switched on business people will see it for what it is and are likely to assume you are attempting to nickel and dime them.

If it is in the original contract, the usual term is for it to be **% above a particular bank`s base rate.