Charging a late fee can create a sense of urgency with your client since it notifies them there is a consequence for not paying timely. Invoices with a penalty for late payment tend to get prioritized over those with no late fee. While late fees aren’t going to make you rich, they can save you the time and energy of chasing down payments.
Make sure you discuss your payment terms upfront and have an agreement in place. Having a client find out about a late fee after the fact can be uncomfortable and a time drain for you and the client.
A typical finance charge is 1½% interest per month. However, finance charges can be as low as 1% or as high as 2 or 3% monthly. You can always charge a flat fee instead of a percentage. The amounts can vary based on factors such as customer size, customer relationship, and payment history.
In QuickBooks Online, there are a few ways to charge late fees, below are three ways.
Here's how to create an invoice for an additional charge:
Here's how to add an additional charge on an existing invoice:
Log in to QuickBooks Online as the master administrator or company administrator and then:
Many QuickBooks apps such as Biller Genie, Bill.com AR, and Invoice Sherpa offer late payment features that are more automatic than hand entering late fees in QBO. Consider the cost of another app compared to the cost of manipulating QBO to charge late fees. An app may be a great solution depending on your situation.
It’s important to remember that the purpose of a late fee is to motivate timely payment and NOT to create an extra revenue stream. That said, make the fee enough for people to act, make the fee easy for your bookkeeper to implement and not too exorbitant that the client feels you’re being unreasonable.
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