I am fed up. Can I hit my latepayers with a late fee?

Hi BB,


Is it possible to apply late fees to debtors who are refusing to pay in any reasonable time? I need to know.


I am a subcontractor and have a verbal agreement with another small company who are representatives/authorised dealers of a bigger company. They are screwing with me on outstanding invoices.


Can I begin to apply late fees after a lengthy period and also after letters of demand? Yes, I did just read the doormat correspondence, but I think a year is ridiculous, and counting!





Dear CK,

What? They haven’t paid you for a year! Outrageous.


Look, I have consulted Uncle P, our legal adviser (Peter Vitale to you) and he says that applying the terminology “late fee” is not really a good idea under Australian law.


It may constitute what is known legally as a “penalty”, which is unenforceable in these cases.


A more effective approach is to charge interest on late payments – which can be higher than standard rates, but not too much as, again, there might be a risk it is found to be a penalty.


Another approach is to offer a discount for early payment.


This is a tricky area of law and you should probably get legal advice.


But what is abundantly clear is that your company has an inefficient receivables management process in place.


The best way to ensure that you are paid on time is to escalate pressure on your debtors at appropriate stages in the payment cycle and to ensure that your accounts receivable process is efficient and effective.


Efficient I hear you cry? What’s that?


Well, here is some advice from Christine Christian, chief executive of Dun & Bradstreet. She says an effective receivables process is characterised by:

  • The establishment of clear credit terms at the outset of a relationship.
  • Prompt issuance of invoices.
  • Tracking of accounts receivable to identify slow-paying customers.
  • Regular communication with customers to identify and resolve problems before invoices become overdue.
  • Action taken against a debtor if they are persistently delinquent.


Good luck!


Your Aunty B.

Aunty B - Your problems answered by SmartCompany's business bitch

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