Posted by Merry_CA on 10/5/06 4:42pm
Msg #150540

Finance Charges on Past Due Invoices

A fellow NSA emailed me with a question about charging late fees on invoices. I thought my response might be of interest (no pun intended) to this board:

*Our family steel fabrication business (my "day job" states the following per CA state law on all invoices:

FINANCE CHARGES: Terms of sale are cash, unless credit is approved. Approved credit sales terms are thirty days net. Finance charges may be assessed on past due balances at a periodic rate of 1.5% per month (Annual Percentage Rate 18%). Reseller shall be obligated to pay costs and expenses of collection, including reasonable attorney fees.

I have the same verbiage on my NSA invoices. A "deadbeat" isn't going to be moved by this, but some good people who are just lazy and slow payers may at least pay the original invoice amount.

I run my NSA business the same as I do the steel fab. business. As an NSA I provide a service and expect to be paid in a timely manner. The vendors I use to provide my NSA service (e.g. gasoline, paper, toner, equipment purchase and maintenance, etc.) expect, and receive, payment from me according to their terms of sale. If I do not comply, I will be refused credit. Most all NSA's are extending credit to SS's, TC's and LO's without doing a simple credit check. The next time a SS calls you to do a signing tell them you first require an application for credit (with references) unless they are paying in full via PayPal. NSA's accept assignments from people that they will never see face to face. This is one of the main reasons that we are so easy to rip-off.

Don't extend credit before doing a credit check. At the very least, ask your customer's for three business references who will attest to their payment record.

For some reason (quick money and/or greed,) NSA's are not applying the most basic established business principals to their dealings with their customers (SS's, TC's and LO's.) YES! these are our CUSTOMERS. They come to us to purchase our service. We extend them credit every time we provide service without first checking their credit. I would love to see more NSA's with the good sense to require PayPal payment in full prior to each assignment until the customer's credit is well established.*

Reply by Jason on 10/5/06 4:49pm
Msg #150541

18% might be too high. Hugh? PAW?

I recall something about only financial institutions can chg over 10% interest.

Maybe Hugh, PAW or somebody knows.

I charge a flat fee per week so I don't mess w/ interest limits.

Merry: good post.

Reply by MistarellaFL on 10/5/06 4:52pm
Msg #150544

Can't we set up QB

To state this on the invoice, and also to calculate interest accrued?

Reply by Merry_CA on 10/5/06 4:55pm
Msg #150545

Re: Can't we set up QB

Yes, that's how I do it.

Reply by Roger_OH on 10/5/06 5:00pm
Msg #150547

It's your business; you can charge whatever you feel is competitive. Whether you'll ever collect it is another matter.

Asking for credit references is a nice idea, but as soon as you do, the SS will just move down their list to the next notary who's not as discriminating. Sadly, in an NNA-saturated field, they have their pick.

Reply by Charles_Ca on 10/5/06 5:05pm
Msg #150550

1.5% per month has been pretty much the usual charge....

I think its quite conservative. I charge 2% per month to try and I offer net -2 for 10 days to try and give people an incentive to pay sooner rather than later. I rarely get either, just FYI but then if they go 35-40 days I don't get too upset but the notice is there in case it goes any further. Various States have usury laws and there is a lot of misconception about them so you may wnat to check. Your family steel business doesn't by anychance have an tube bender that they purchased from a hydraulics engineering company in Oakland?? I sold one of my tube benders when I closed the business to a steel company in Vallejo so that they could make railing components.

Reply by David Kral on 10/5/06 11:02pm
Msg #150634

Rates-Check state law

I believe I asked my CPA once had he indicated there is a limit in my state per the state usry law. I believe 1.5% is the max on my state. Seems I saw it on a disputed healthcare bill I had while I worked it out between the doctors office and the insurance company.

Also, in my state, I believe you have to give notice to start charging. Thus, you can't magically add it to an invoice 90 days past due. If you do, they it start from some reasonable noitce period.

I would double check what you are allowed to do.

You also have to post a return check fee and there is max limit in my state on that too!

Reply by Sarah/CA on 10/6/06 12:59am
Msg #150646

I would like to know if you have ever had to attach these fees and received them. It is a great incentive to pay but how many of you out there have actually received a check with the late charges attached when they are late?

Reply by PAW on 10/6/06 8:08am
Msg #150671

I've had two instances where a company was seriously late in payment. In one case, legal action was started and payment was received with all late payment penalties. In the other instance, it appears that the threat of legal action (3rd and final demand letter) was enough to prompt payment, which included accrued penalties.

My invoice clearly states our late fee charges and when they are applied. Invoices are created and sent to my customers on each and every signing, whether or not they want it. It is a business decision that was made on advice of counsel when first establishing the business model.

Reply by MistarellaFL on 10/6/06 9:22am
Msg #150682

Good advice Paul.

Although I have no delinquent accounts at the present, I think I will modify my QB invoices to reflect the penalties.