I send out invoices to our local school each month for pizzas that they buy and resale at events and games. The school is very slow at paying theses invoices they currently are about 6 weeks behind on an invoice for $1400. The terms on the invoice are “Due Upon Receipt”
Can I start charging a financing charge for this, like other vendors 18 % APR? Or a late fee? Do I need to notify them that I am going to do this? If so, I will change my invoices for the future to include the penalty information, but wanted to know if I should bother or just except that the school is slow at paying me.
Do you bid on this every year? My thoughts. I wouldn’t want to lose the business, but you need to give them a sense of urgency on paying the bills. Which obviously they do not have.
When you rebid this contract, or even in your next invoices, start prepping them for this. Similar to the tax bills we get every year.
Agreed upon discount (is it a % off? Dollar amount?) XX.XX if paid within 7 days.
10% off if paid after 7 days.
Regular price if paid after 14 days.
2 % penalty after 14 days.
The layout needs some help, but you basically admit to giving them a discount, and tie the discount to prompt payment. I’d also start sending second notices after 7 days, 3rd after 14 etc… this may put it higher in the priority list and maintain a professional image for you and your vendor relationship with the school.
Hard to respond to this since you didn’t give us any details on how you set this up, the conversation, etc. . .
I will just “guess” that there was little or no discussion of payment terms, but rather you just put the terms on the invoice???
This is government you are dealing with – meaning they don’t operate in real world economics and efficiencies. Going into any of these deals with these agencies, we always discuss the details of payment. Firmly establish the terms and “who to contact” when these terms are not met. Personally, I have not had a problem with payment when the terms have been throughly discussed. It doesn’t mean payment is always on time, but you have a contact for when this happens. In another business I am involved in we do a lot of wholesale via accounts. Its just a time consuming process to manage accounts receivables period. If you do accounts, you just have to be diligent in keeping after them.
I’m really not in favor of penalties either, as it just puts a bad taste in their mouths. Either they are worth the time and effort to collect or they are not. You can try giving them an invoice with a price and explain that if the payment is received within seven days there is “x” percentage off. However, many times they will take the discount regardless. Maybe you could tell them you will apply discounts to future orders. i.e. you calculate 5% of one payment as its received and give them credit on the next invoice.
Just my 2 coppers . . . Obviously, sometimes you have to take the terms you can get because you need the business, but I try to stay away from any kind of terms as it just sucks all the energy out of me that I could be putting in more productive areas.
I’d recommend against simply sending a billing with a late fee attached without speaking to someone in their Accounting office first. In my current life (NAPA) many of our government type accounts are 5-6 weeks out when paid simply because they have to have their billing approved at a board meeting.
This may or may not be the case at hand, but a phone call or personal visit to the principal’s office would go a long way in keeping the business coming I think.