Are late charges more trouble than they're worth?

You expect customers to pay you on time and in full. But with fewer and fewer of them living up to those expectations, it’s the perfect time to check that your late charge policy is as efficient as it could be.

Your A/R staffers may feel at times that charging — and collecting — late fees is more hassle than help.

It could be a sign your late fee policy could use a little revamp. With payment stretchers running rampant these days, you certainly want a little extra motivator to get that money in the door.

Take a few minutes to look at your existing late charge policy with these three questions in mind:

1. How are we communicating our policy? Every document that contains your payment terms (credit applications, invoices, etc.) should also contain your late payment policy. If customers feel blindsided by a policy, it’s going to be a lot tougher for you to enforce it.
2. Are we presenting a united front? If Sales isn’t backing your A/R and Credit folks, even your toughest line will have little teeth. Be certain salespeople understand your policy and are willing to support it.
3. Have you “cried wolf” in the past? Writing off a late fee now and then will seriously undercut your policy. Yes, customer relations are important, but terms are terms. And if you’ve communicated it clearly from the start, you’re justified in making no exceptions.