Current Trends in the Practice of Administering Late Payment Charges

Live Report

25-Sep-2001 5:03:52 PM

There are a total of 380 responses FROM 27-Aug-2001 to 18-Sep-2001.

Nature of your business.


	Percent	Count	Answers

	1.9%	7/375	Appliance & Tools
	2.7%	10/375	Personal & Household Products
	8.8%	33/375	Food, Beverages & Kindred Products
	1.3%	5/375	Textile Mill Products
	4.0%	15/375	Apparel and Fabricated Textile Products
	3.5%	13/375	Paper & Allied Products
	6.4%	24/375	Printing & Publishing
	2.4%	9/375	Computer Hardware, Peripherals & Storage Devices
	0.5%	2/375	Software & Programming
	0.5%	2/375	Semiconductors
	1.1%	4/375	Containers & Packaging
	2.9%	11/375	Medical Equipment & Supplies
	0.0%	0/375	Biotechnology
	3.5%	13/375	Pharmaceutical
	6.9%	26/375	Chemical & Allied Products
	1.3%	5/375	Energy (Petroleum, Coal & Gas)
	0.0%	0/375	Auto & Truck Parts
	1.3%	5/375	Furniture & Fixtures
	0.5%	2/375	Photography
	0.3%	1/375	Office Supplies
	2.9%	11/375	Rubber & Allied Plastic Products
	1.1%	4/375	Lumber & Wood Products
	0.8%	3/375	Leather & Leather Products
	0.0%	0/375	Non-metallic Minerals, except Fuels
	2.4%	9/375	Stone, Clay & Concrete Products
	2.7%	10/375	Primary Metal Industries
	5.6%	21/375	Fabricated Metal Products
	2.4%	9/375	Industrial, Commercial Machinery
	5.9%	22/375	Electronic & Electronic Equipment & Components
	0.8%	3/375	Measuring, Analyzing & Technical Instruments
	0.5%	2/375	Electric, Gas & Sanitary Services
	0.5%	2/375	Transportation Equipment
	7.7%	29/375	Wholesale Durable Goods
	2.7%	10/375	Wholesale Non-durable Goods
	3.5%	13/375	Business Services
	10.7%	40/375	Other

	100.0%	375/375	Summary

Your customers are primarily:


	Percent	Count	Answers

	32.0%	119/372	Retailers
	25.5%	95/372	Wholesaler/Distributors
	12.1%	45/372	Original Equipment Manufacturers
	8.9%	33/372	Value Added Resalers
	7.0%	26/372	Service Businesses (i.e. Healthcare Facilities, Schools, etc.)
	14.5%	54/372	Other

	100.0%	372/372	Summary

Your US Domestic Sales volume is:


	Percent	Count	Answers

	4.5%	16/352	< than $10 million
	12.5%	44/352	$10 - 50 million
	11.9%	42/352	$50 - 100 million
	19.0%	67/352	$100 - 250 million
	12.2%	43/352	$250 - 500 million
	7.7%	27/352	$500 - 750 million
	7.4%	26/352	$750 million - 1 billion
	20.7%	73/352	$1- 10 billion
	4.0%	14/352	> than $10 billion

	100.0%	352/352	Summary

Does your company assess a charge to customers who pay late?

Percent Count Answers

35.1% 131/373 Yes

64.9% 242/373 No

100.0% 373/373 Summary
What do you call this charge?

Percent Count Answers

43.7% 59/135 Service Charge

25.2% 34/135 Late Payment Charge

20.0% 27/135 Interest

11.1% 15/135 Other

100.0% 135/135 Summary
Are all your customers charged a penalty for late payment?

Percent Count Answers

27.2% 40/147 Yes

72.8% 107/147 No

100.0% 147/147 Summary
To what % of your customers does your late payment POLICY apply?

Percent Count Answers

37.4% 40/107 < than 25%

7.5% 8/107 26 - 50%

13.1% 14/107 51 - 75%

42.1% 45/107 > than 76%

100.0% 107/107 Summary

If exceptions are granted, what area of your organization grants them?


	Percent	Count	Answers

	41.8%	51/122	Credit & collector (when the same)
	28.7%	35/122	Credit
	0.8%	1/122	Collector
	9.0%	11/122	Sales
	3.3%	4/122	Marketing
	0.8%	1/122	Customer Service
	12.3%	15/122	A Senior Executive
	3.3%	4/122	A Customer Team

	100.0%	122/122	Summary

Does your company stipulate on its credit application that it reserves the right to assess a late payment charge on past due accounts?

Percent Count Answers

86.1% 130/151 Yes

13.9% 21/151 No

100.0% 151/151 Summary
Indicate which documents are used to notify customers of your late payment charge policy.

Percent Count Answers

28.7% 109/380 Credit Application

20.8% 79/380 Terms of Sale agreement

27.1% 103/380 Invoice

21.8% 83/380 Statement

7.6% 29/380 Other

Which method of assessment of the late payment charge do you use?


	Percent	Count	Answers

	41.2%	56/136	Invoice separately after payment of past due invoices.
	58.8%	80/136	Accrue each month and add to the customer's open balance.

	100.0%	136/136	Summary

Do you stipulate in your late payment charge policy the point at which you begin to assess the late payment charge? (i.e. how many days past due)

Percent Count Answers

69.1% 96/139 Yes

30.9% 43/139 No

100.0% 139/139 Summary
Do you strictly adhere to this policy?

Percent Count Answers

52.6% 71/135 Yes

47.4% 64/135 No

100.0% 135/135 Summary
After how many days past due do you begin to assess the charges?

Percent Count Answers

23.4% 32/137 1 to 5 days

8.8% 12/137 6 to 10 days

14.6% 20/137 11 to 30 days

53.3% 73/137 30 + days

100.0% 137/137 Summary
Do you carry the late payment charges on your A/R or off the books as a memo item?

Percent Count Answers

71.3% 97/136 On the A/R

28.7% 39/136 Off the books (in a memo file)

100.0% 136/136 Summary
What percentage of the late payment charges do you collect?

Percent Count Answers

33.3% 44/132 < than 25%

25.8% 34/132 26 - 50%

21.2% 28/132 51 - 75%

19.7% 26/132 > than 76%

100.0% 132/132 Summary
What determines the percent of the late payment charge to your customers?

Percent Count Answers

18.4% 70/380 State usury laws

15.3% 58/380 Industry norm

1.8% 7/380 Prevailing cost of capital

4.2% 16/380 An arbitrary amount
Do you believe the intimidation of a late payment charge helps your company to be paid more promptly?

Percent Count Answers

52.4% 75/143 Yes

47.6% 68/143 No

100.0% 143/143 Summary

What leverage is used to prompt payment of late payment charges?

Finance Charges remain on account until paid. Depending on the amount some charges are removed after a period of time.

1. POSSIBLE CHANGE OF STATUS TO A CASH ACCOUNT.
2. HOLD ORDERS

The only leverage that you really have is closing the open account.

Cod , credit hold, and we will take a customer to litigation over service charges

The sub-set of customers we charge late fees are smaller customers who are familiar with late charges from other vendors. The simple follow-up actions by a Credit Rep is some leverage on its own. In a few cases, we could hold future shipments if the late payments were routine and the customer volume was small.

Place customer on hold and hold orders

Late payment penalties are imposed on a case by case basis. It is one of the things we use to leverage payment when the customer is stalling. It is simply one of the collection tools we use to get paid.

Generally we add the pymt charges to an account when it is turned over to an attorney or collection agency.

Creidt Holds, Suspension & Revocation

Holding future orders

We fax the service charge to the customer and ask for payment as well as call them to collect the service charge just as if it were any other AR invoice.

It depends on the frequency of lateness and volume of sales. But account runs the risk of being closed.

Effect their credit rating

send letters requesting payments, at times accounts are on hold until they are paid

The statement is sent out monthly with s c on them. I won't make a call just for a service charge.

If a signed credit application or agreement is in place, we use the signer as leverage. If nothing on file, we can only "urge" for payment. The "urgeing" doesn't usually work, but the signature does.

Send them copy of credit application that they signed showing that they agreed to pay late payments.

As credit manager, I have inherited the practice of charging this interest. However, we never collect it, nor do we pursue collection of it. I find it to be a useless tool, but since our accrual is off the books, there is no reason to blow it up either. It's just there!

Interruption of delivery of serice &/or product

Hold new orders

Occasionally holding orders.

Holding of future orders

Credit hold of upcoming orders

Small customers will pay late payment charges,future invoices are paid prompt. Larger customer are not intimidated by late charges and normally ignore them.

Re-fax when payment arrives without including late fees. Also will compromise: pay most recent late fee (if account is paid up) and prior unpaid late fees reversed.

Potential rise in price of material

Depending on who the customeris:
1. Reduction of terms
2. Hold future orders

will not ship additional product

Release of current orders.

Limit open account privileges.

Dunning notice, collection calls. Nothing that is not part of standard deptarment opertional procedures.

Will "Hold" accounts

If not paid, eventually the customer is moved to COD
with an add on for the late charges.

Sometimes place account on hold in extreme cases. Sometimes use as a negotiation tool to split, but always as an education tool as to what we expect from them as our customer

closing credit line......settling for a % on a lump pmt.

WE SHIP 6 DAYS PER WEEK. IF MUTLTIPLE FINANCE CHARGES ARE NOT SETTLED THE CUSTOMER MAY BE PLACED ON HOLD.

Future scheduled print work, illustrations of slow payment habits and a reminder of the agreed terms of sale.

Send invoices and statements
Apply payments to interest invoices first

Our program has just been initiated this month, however we anticipate that unpaid finance charges will result in customers being excluded from promotional programs, etc.

Hold orders, hold production scheduling, negotiate to write off if pay other items. Place for collection if not to ship again.

Late payments are assessed when an account is placed for collection or with an attorney. It can be waived if payment is issued promptly.

Pay it now stay current, will not be an issue in the future.

Cash posting 'Balance forward'

NONE! We actually only charge the interest on late invoices when we place an account for collection or have turned the account over to our attorney to file suit.

We often forgive the interest if they will pay the principal now.

Normally they are treated as any other past due invoice. If past due themselves, they can adversly effect the customer's credit standing.

WE just started but we do add a Notice of Intent to Lien a buidling when we notify a customer if they do not pay by a specific date.

Sometimes we may inform the customer that we will waive part or all of the service charge if they overnight the full amount of any past due balance owed. We also may inform the customer (if they are a chronic slow pay), that until the service charge is paid, all ordes are either on hold or prepay.

Not a lot of leverage is used. We bill the interest but do not put a lot pressure on the customer to pay.

We typically call our customers and advise that a late payment charge will be forthcoming and they can avoid this charge by sending their payment in immediately. So we use the late payment as leverage in getting paid more promptly...If a customer can not send in the payment on time, we will hold orders until the past dues and service charges are paid.

credit suspension
delaying orders

Potentially going on hold

Treat as an open invoice that is due and payable.

Salespersons are informed the customer will be placed on hold if not paid and not waived by marketing.

holding orders if necessary

If the late charge is over $50 the account will automatically go on hold.

We try to to exert "leverage" but make it clear that we expect such charges to be paid and are usually paid. We will negotiate the amount in exchange for commitments for prompt payment in the future.

Threat of future orders going on credit hold until all past due balances are paid.

NON-PAYMENT IS TREATED AS OPEN UNPAID INVOICES AND
ACCOUNT IS PLACED ON HOLD.

Mainly used as leverage to get paid more quickly. Many times, customers will respond if threatened with late fees. Otherwise,why would a customer pay us (if we don't charge late fees) before they paid another vendor who does assess late fees?
Then, when you have them on the hook to get payment, may as well try to get what you can in late fees.

WITHHOLDING GRANTING ADDITIONAL CREDIT

WITHHOLDING GRANTING ADDITIONAL CREDIT

1) Credit hold

2) Collection Letters

Hold future orders.

Service interruption and/or holding shipments.

Close account if not paid

With smaller accounts, suspension of shipments/holding pending orders.

With large accounts, when they conduct post-audits and deduct based on them, we reciprocate in kind.

Deduct from year end rebates if late payment charges from prior edition year have not been paid.

No Sales Allowed

Threat of withdrawal of credit priviledges.

California ABC Liquor Laws

We only have one or two customers (very large) that we have built the finance charge into the long terms service agreement under the terms and conditions.

If the account goes over 60 days and is put on Cash the late fees must be paid before it is opened. If they paid before 60 days it is carried on their account and a letter is sent advising them they need to pay the charges.

1. We do not charge s/chgs until an invoice is more than 60 days late.
2. We tell our customers that it is reasonable and fair that if they are going to use us as a bank that we should be paid for it.
3. We tell our customers that borrowing from the bank is a cheaper alternative.
4. Our greatest leverage: Our monthly invoice is generally the largest receivable item the customer has, and we have few competitors.

Holding of Orders

Denial of futher credit privleges until paid.

Immediate fax is sent when payment is received and service charge is not included. Regularr 2 week faxes sent requesting payment.

I would like to withhold orders to enforce payment, but
management will not allow that. I do think we might
lose business if I was able to take that stance.

Sometimes I am able to negotiate a 50-50 split of the
charges to at least recoup some of the outstanding amt.

threat of sending to collections

Possible change from open terms to COD or cash in advance.

These charges are included in the past due balance that can exist on an account. If these amounts are large enough, follow-up could be completed which can include interruption of service due to nonpayment. Also, if customers take exception to the general policy of late payment charges, they are referred to the terms & conditions of service and the appropriate rate schedule which are filed with the respective state corporation commissions.

continuing open credit terms can be interrupted if finance charges are not paid.

Continued credit sales - Order holds

Normal Collection activity

Failure to pay finance charges results in COD, if it is cronic, then the customer's ability to charge is taken away.

In some of our operating units, we are notifying customers that they have X days to bring thier account current and service charges will be assessed after that date. We regard this as any other receivable. This has top management support.

Cut off of service

Future shipments - credit priviledges could be withdrawn.

Possibilty of holding future orders.
Request that pay all future invoices within terms.
Possibliy put them on EFT payments.

Difficult to use any kind of leverage. Credit on hold has backfired.
Customers use the excuse that they got the invoices late.

Difficult to use any kind of leverage. Credit on hold has backfired.
Customers use the excuse that they got the invoices late.

If you get your payment here by, there won't be a late
fee. Can carefully be used a leverage on a long overdue
balance.

Holding future orders

credit is suspended if non payment of s/c persist and the customer continues to pay beyond terms.

We will offer the customer a lower sales discount if they insist on slow pay and refuse to pay service charges.

Credit blocked shipments
Failure to confirm orders
Sharing information with credit reporting agencies

Holding orders, decreasing or removing open lines of credit

Future orders.Approval has to come from an upper level manager who may not even be aware how late they have been paying.

Future orders.Approval has to come from an upper level manager who may not even be aware how late they have been paying.

Change of terms to C.O.D.

Briefly describe major issues in charging service charges for late payment?

most company's don't pay charges

If late charges were not assessed after 30 days the customer feels they have all time in the world to pay without penalty. Smaller companies cannot afford to finance customers inventories.

Large customers do not want to pay.
Customer claiming credit due.
Disputes.
Timing of equipment shipment to commercial jobs.

The toughest part of service charges is the equal enforcement with all accounts whether they spend one dollar or 100,000 dollars.

Different laws in different states: Arkansas, Texas, etc...
Mgt. who will not always support your efforts due to slow or declining sales
Getting sales people and branch managers conditioned to not tell customers they don't have to pay them

Have to be very careful with adhering to legalities since we do not charge them to all of our various customer segments. Other segments get discount terms while this segment does not.

Difficult to administer.
Not a common industry practice in the plumbing wholesale business.
Customers simply do not want to pay.

Because we do it selectively, it is a manual effort. By that I mean someone in the credit department enters a debit to the customer account, and then is responsible to collect it.

--habitual late payments
--holding checks for weeks before releasing them
--not wanting to provide a 'free loan' to the customer
-- not wanting to be a 'bank' for our customers
--it can cause some ill-will with some customers who don't think that they should receive an SC but we expalin that they have a 30 day grace period before we charge the SC to the account so they have plenty of time to get payment to us before this happens.

When a large customer refuses to pay, you run the risk of loosing that business if you don't write off the disputed service charges.

When 3rd party payers are involved..probelms arise..i.e. we bill a church, they must go through the general and possibly the sub contractor

Most customers completely ignore the service charges. But every once in awhile some get paid. I do insist that if an account goes to collection that the agency recover all service charges too.

In our case, we carry the finace charge on the a/r, but there is not a general ledger account for it. If they are paid, we apply the payment as a credit to bad debt.

Customers may refuse to do future business with you. The time it takes to collect small amounts is not worth the time and $$.

For accounts we turn to an outside Collection agent,
we collect the agency fees from the customer before we
resume service or product delivery.

Many customers refuse to pay them

Very large customers with billing and reconciliation issues.

DELAYED FUTURE ORDERS CAUSE PROBLEMS FOR OUR SUPPLY CHAIN.

Many customers simply refuse to pay & claim they will go to the competition if we enforce the service charge.

Customers become more hostile and the sales and marketing force resents the fact the we charge late fees.

don't pay whe promised or with in terms

account being more than 60 days past due,
no response to collection calls & letters
no dispute on account

Only used when a distributor is consistently late in payments and is asking for continuing the delay of payments.

Crossed in mail checks, and actual 'lost in mail' checks, generate a refusal to pay.
Sales force pressures to reverse late charges on volumne customers.

Clashing with customer policy that they don't pay finance charges. You then must decide if they are a customer who doesn't get charged finance charges or if you choose to lose them as a customer.

increases receivables with items on which we will collect aprrox 40%

customer reaction and refusal to pay

Competition does not charge late fees; therefore we foregive the majority of our charges.

"Competition doesn't charge them."

The return on the investment is not good. It is a manual process, which if done correctly requires a significant amount of time.

Failure of some to take it seriously.

Many won't pay until you call and play "let's make a deal" (i.e.,split it 50/50)

Price and service package has cost of money for our
standard terms. If the customer increases our cost,
his cost increases.

Very manual process. Not automated in our system.

My customers don't pay me for my late charges.
I never pay service charges.
Disputes pending.

CUSTOMER COMPLAINTS OF CREDITS DUE, POD'S NEEDED, PRICE DISCREPANCIES, AND THE POSSIBILITY OF LOSS OF THE ACCOUNT IF ENFORCED.

Sales doesn't take kindly to the charges, but they understand it is in the company's best interest to get the reminder note out there and bring the average days to pay down. And of course there's always the threat of losing a customer, but the charges are small in relation to exposure--and they're more to prove a point than to collect on..

Each invoice has to be hand-calculated.
Customer will sometimes pay past-due invoice, but ignore interest invoice & I have to write it off.

Difficult to leverage large customers with credit hold.

It may encourage prompt payment on the smaller accounts, but the larger customers ignore them. Unless you are consistent and firm, across the board it becomes a futile effort.

Proper documentation being provided on finance charge invoice.
Usury issues.

Must have a grace period, probably 10 days, due to mail, customers paying weekly with weekend. Should be part of price/terms negotiation. Can not charge until abuse in payments, then remind of policy and to start billing if payments do not improve.

Competitive factors make day to day service charges unfeasable.

Those that require a 'document' in order to pay the charge. We then create an actual document for them.

Client's do not look favorably upon your company when they are assessed late payment charges and the ability to retain them becomes problematic.

Client's feel they do not have to pay late payment charges and that they will eventually be credited off their account. The reasoning behind this attitude is that the client assumes that we would not want to lose their business over these types of charges, (and 9 times out of ten they are right).

Invoice never received. Have always paid this way.

1. goodwill can be adversely affected.
2. Can create a barrier to additional sales

We just started so we are not sure how successful this will be so we have not had any major issues as of yet.

The larger customes feel that because of the amount of business they do with us, they are exempt from service charges. unfortunately this is sometime true.

Recoupe cost of money.

Cash flow for our company.

customers do not have the opportunity to charge their customers this service charge

System related issues on calculation

getting it collected.

Disputes, mail time, material issues.

Consistency within branch locations.

(1) The cost of implemeting such a program. Normally, the cost is quite minimal compared to the return.
(2) These programs are a good way for a credit department to "help pay for itself."
(3) Don't let yourself get duped into thinking that collecting interest is a substitute for prompt payments. Collecting a little interest but winding up with a bad debt, because you didn't react to the slowing payment trend by withdrawing credit, is a poor choice.

Several companies flat out refuse to pay then a decision must be made on weather or not to tell to them.

We charge for the following reasons: 1) Costs of collecting and maintaining past due accounts; 2) Cost of capital; and 3) As a deterrent for late payment.

Notifying customers of late charges being billed.

CHARGED ON INVOICES THAT ARE LATER CREDITED.DISPUTED
INVOICES ARE ASSESSED SERVICE CHARGES THAT THE CREDIT DEPT.DOES NOT KNOW ABOUT.

Added admin./ collection time
Requires collector judgement as to when to give up in trying to get late fees paid

Documentation of the contractual terms including service charges.

Not cost effective at the issuance of the charge. extremely manual followup.

Sometimes they are charged against disputed invoices. We write these off when discovered.

Manual process & tracking.
Lack of support from sales & service line organizations.

Need to cover our cost of money

Lack of leverage equals futility in assessig these charges. If you don't have the hot product that a retailer needs, most will simply refuse to pay such charges.

Late Payment fees are assessed on a market specific basis.

Customer complaints - they don't charge there customers and if they did they would lose all their business

Information Technology is not prepared to issue such a document at this time.

Determining if late payment results from billing/shipping errors or simple cash flow issues.

There is no way we can rightfully enforce the charges and getting paid for them. Courts find it hard to make it a mandatory payment. But we collect what we can and negotiate where we can.

1. Utilize incentives for early pay (discounts) and disincentives (service charges) for unacceptably late payments.
2. When to charge the service charge.
3. How much (or what %) to charge.
4. Guidelines for exemptions.
5. Guidelines for negotiations on lowering charges.

Trying to collect them. I usually assess them on very large past due customers.

Not sure what this question means.

1. The honest people pay them. The ones who abuse our
payment terms are the ones who refuse to pay them.
2. They do become uncollectible. When we do write off
unpaid svc chgs for these customers, are we treating
them differently than our customers who do pay?
3. We are a manufacturer & have warranty returns. We are
not as prompt in processing the credits as we could be,
so many svc charges are written off after applying the
credit due.

accounting system

Hard to collect.

Application and collection

LARGER CUSTOMERS REFUSE TO PAY

A small percentage of large industrial customers will not include late payment charges with their regular payments; therefore, manual follow-up by company personnel must be completed. There are instances in which these situations are sensitive due to the size of the service.

some major customers refuse to pay finance charges and threaten to take business elsewhere if we expect them to pay.

Attention getter to push toward reduction of pay time and to help cover some of our cost of capital in extreme cases.

Small amounts, supress less than $5.00

#1 Is incentive to pay timely
#2 The larger volume customers are rewarded with a discount if they pay timely.
#3 The customers who pay late are not rewarded.

Buy in from top management to enforce collection is necessary.

At times this can stress customer relations.

Customers simply ignore your policy especially the large ones.
Difficult to enforce without getting customers upset.
Cost benefit is negligible and does not really encourage business growth especially in a competetive industry such as ours.
Our customers find it customer unfriendly policy.

Customers simply ignore your policy especially the large ones.
Difficult to enforce without getting customers upset.
Cost benefit is negligible and does not really encourage business growth especially in a competetive industry such as ours.
Our customers find it customer unfriendly policy.

Hospitals don't pay, so they dispute.

Customer goodwill

It' susposed to encourage prompt payment. It lets the customer be aware that the account was not paid on time. It helps encourage prompter payment of legal matters because the interest continues throughout the suit. It makes the customer aware that a bank is a better place to finance their receivables. You must never insist on payment of service charges if it means you lose the customers business.

Using scarce resources to collect small fees (assuimg a negative approach) as opposed to managing the relationship in a positive, proactive manner that prompts and maintains Current payments.

Failure to support collection by sales force
Exemption of Interest Charges by legal entity
Exemption of Interest Charges by customer contract

Identifying disputes

Number one response is "we don't pay late charges". My number one reply is "I don't usually charge them either, but in your case, I'm making an exception because . . . "
Most companies who bill, don't really try to collect so they realize they can get by without paying in most caes.

Number one response is "we don't pay late charges". My number one reply is "I don't usually charge them either, but in your case, I'm making an exception because . . . "
Most companies who bill, don't really try to collect so they realize they can get by without paying in most caes.

Consistent application of policy

The competition may not charge.

Briefly suggest some critical elements essential to assuring success of a late payment charge program.

strong policy followed by all (sales, marketing, credit)

Consistency. It should become an accepted business practice and customers know the consequences for not fulfilling their commitment made at the time of the sale. We know we are at the top of some customer's list to pay because they know they will be charged finance charges.

Major push prior to issue credits and clear disputes.
Full support of sales.
Ability to easily reverse a s/c.
Alert customers well in advance that need to pay or have s/c billed to them.

Include your terms of sale on every piece of lierature that the customer will get e.g.; credit app's, invoices, statements, and acknowledgment letters.

Make it part of the credit and collections managers bonus.
Meet with the chronic abusers and get new understanding on a go forward basis
call and press for money sooner so that service charges are not the residue on the acct.

Good data on tracking performance. Clear communication to customers on policy. Fair and consistent application of policy. Making sure collectors understand the right degree of priority vs other more pressing activites.

Must be accepted as a practice in the industry.

Get the customer to agree to accepting the charges, confirm it in writing, don't let them off the hook.

Holding orders until late pymts are paid.

Proper notification and explanation of terms.

1. Make sure the customer has been clearly notified of the service charge program.

--being fair and consistent in charging SCs and actively collecting them, don't issue them if you are not going to go after them.
--use it as leverage for more prompt payments, if you send the check a week earilier you would save X dollars in service charges or an over night fee is less then the SC, so over night the check.

Don't write off service charges or customer knows that policy is not strictly followed.

Inform the customers that if they borrowed from the bank they could be charged a LESSOR amount of interest, our terms are net 30 days any account going past that is subject to our credit terms which are 1/1/2 s.c. after 30 days

Don't be too strict about it, you will upset customers. I only get tough on them when a customer sets their own terms by paying on account without permission or discussion. Then I let them know that the balance will go down, but all service charges will apply.

It must be disclosed on any and all documents available that it is charged.

A signature on a credit application or agreement is extremely helpful in the event (God forbid) if the client goes south and you have to go to suit. A majority of courts will award the finance charges IF there is a signature agreeing to it being charged and payable to the creditor.

Always stress during a collection call that it will be cheaper for them to pay 10% to 14% to a credit card company by paying us by credit card then the 18% that we will charge and adhere to according their signed credit application agreement.

Can't. I've never seen one be successful as measured by the leverage it exerts on collections.

Commnication! With internal & extenral customers:
on as many documents as possible, reiteration with
contract addendums, reiteration from Sales Management
to Sales Team, "kill 'em with kindness!" approach in
all communications. The ability to leveraae deliveries
helps as well.

Consistent approach in asessing and collecting them.

You must get the customer to acknowledge and agree to the service charge before making the first sale.

Communicate its existence and be serious when you enforce it

possibly hold services or items we don't ship if late with payemtns

If they do not eventually pay their invoices and interest for late payments, the Company will evaluate the possibility of termination of our Agreement.

A follow up policy is needed. Ability to regenerate the late charge invoice as the first one is usually tossed away.

****note for 2.19 below: is a slow pay customer going somewhere else really a 'loss?' Minimal loss here.

CONSISTENCY - This is very difficult given that a senior executive decides versus the people who know the accounts on a daily basis.

target the right type of customer.
bill it as an invoice, similar to normal invoice.
collectors must be properly focused on them.

Management must be willing to support the program, even if it results in the loss of sales.

Enforcement of requirement to pay. This may include holding shipments, declining orders, using collection agency or taking legal action.

Be consistant, fair and equal to all.

Don't charge against disputed invoices.

Warn ahead of time that will access late charge if check not postmarked by certain date, then do it if late.

The policy must be clearly explained in Terms &
Conditions agreement signed by the customer. The new
customer must be made aware that if he doesn't pay
within terms, he will pay the late charge and why.

Separate invoice has helped.
Discuss how to avoid accruing them in the future but let them know that if they insist on not paying within terms, they will be charged and collected.

100% participation, support by upper mgmt and total agreement by sales

A ship hold on their account is sometimes the only way to collect.

KEEPING TRACK OF ALL W/O OF CHARGES AND MEETING WITH CUSTOMER TO SHOW DOLLARS LOST BECAUSE OF LATE PAYMENTS. EXPLAINING OUR GOOD PRICING AND SERVICE AND WHY WE NEED TO BE PAID. SHOWING CUSTMER THAT FUTURE COMPLIANCE IS MANADATORY EVEN IF WE MIGHT LOSE THE ACCOUNT.

Get sales on board with what you're trying to accomplish with the charge. Don't depend on collection of the money. Be clear with why their receiving the charge, illustrate slow payments and provide a copy of the agreement, and explain how they could avoid them in the future.

Get written agreement from customer.

The Credit Manager must have authority to leverage the account with credit hold and support from the sales department.

Timely notification of the policy and proper documentation.

Good systems to bill and keep accurate records and detail trail of the billings. Senior Management must be in full support of the policy. Sales and Credit should both agree if it is not to be charged, not charge, spend resources to collect, then have an allowance made by sales or customer service. Up front intial notification. Expect to have to allow anticipation at least at a reasonable rate, if you bill for late charges, must allow it they pay early.

The creditor must be willing to hold orders tof orce custoerms to pay routine late service charge fees otherwhise the program is a toothless tiger.

Everyone in organization needs to support it. Helps when sales supports your efforts to collect the charge. We really rather have current customers.

A firm understanding from the beginning that a finance charge will be assessed.

1. Consistent application.
2. Fairness
3. Treat as any other invoice
4. Upper management must back the policy.

Please share with me.

Making sure that usuary laws are not violated
Making sure that all custmers are assessed not just a select few
That your computer system will calculate correctly the number of days past due

Hold shipments.

buy in of the program by Sales.

Consistency. Invoice separately.

Adherence to a defined policy and procedure

generate an invoice for same
challenge new accounts when past due
be prepared to negotiate to collect

As stated for 2.17, consistency in enforcement; good credit application document.

(1) Eternal vigilance.
(2) If you make a deal with an account that you will allow late payments for some period of time in exchange for interest, define the program thoroughly as to when you expect to be paid and the exact rate. If the customer violates, call his hand on it immediately and enforce. Make it clear that "an agreement is an agreement" and your concession in allowing slowness should be rewarded by his honor in abiding by the agreement.

Making sure customers and sales staff understand at what point a late charge will be added.

Team work between Sales and Credit to notify customers.

CUSTOMER MUST BE MADE TO UNDERSTAND THAT CHARGING
A SERVICE CHARGE IS PART OF THE COST OF DOING BUSINESS.
CUSTOMER HAS A CHOICE, HE IS OFFERRED A DISCOUNT FOR PROMPT PAYMENT.YOU DONOT HAVE A CHOICE OF SLOW PAY
AS WELL AS FREE MONEY.MUST HAVE SUPPORT OF MANAGEMENT
IN COLLECTING SERVICE CHARGES.MUST BE PART OF POLICY

Persistance
Have some leverage other than late fee threat to get paid (we use withholding of service)

AGREEMENT IN WRITING AT TIME CREDIT APPLICATION IS SUBMITTED SIGNED BY A CORPORATE OFFICER, NOT CLERK IN PAYABLES OR PURCHASING WHO DOES NOT HAVE AUTHORITY TO ENCUMBER YOUR CUSTOMERS COORPORATE ENTITY.

AGREEMENT IN WRITING AT TIME CREDIT APPLICATION IS SUBMITTED SIGNED BY A CORPORATE OFFICER, NOT CLERK IN PAYABLES OR PURCHASING WHO DOES NOT HAVE AUTHORITY TO ENCUMBER YOUR CUSTOMERS COORPORATE ENTITY.

Have consistant terms on all documents including quotes, delivery documents, invoices, statements and notices.

You must be consistent and fair across the board. The only folks we do not charge are customers on contracts and it is addressed with pricing and/or rebates on those accounts.

You cannot allow sales or marketing to have any influence on writing them off.

Included in contracts.
Systematic way to calculate & invoice.
Support from sales & service line organizations.
Using service interruption and shipment stoppage as leverage.

We stopped charging late payment charges because of serious anti-trust concerns. I do not believe that many companies can say that they treat all of their customers the same when it comes to late payment fees. For us, the cost of collecting late payment fees was nearly as high as the income, and the legal concerns were significant since we did not charge late payment fees to our largest customers. Trying to defend a policy that specifically excludes the largest customer from late payment fees while charging them to smaller customers isn't something that we were looking to do.

Be firm and consistent - let customers know that everyone is charged

Early customer buy-in in writing.

written policy and customer understanding.

The business group needs to be fully commited to getting these charges paid. It does not appear to be a common practice in the industry to do this.

Resolving disputes relative to late charges; determine cause of late pay, adjust charges as required if reason was our fault.

Consistency. If the customer has been through it before and knows that we're going to be insistent about it they tend to pay more readily.

Fairness is a key issue. If the customer feels that they have been treated fairly, that the seller has given them every chance to pay the bill with no penalty, they will accept service charges.