I’ve been mulling over this issue after a few clients dodged payment terms.
Do penalty clauses really have an impact, or do they just turn clients away? I’ve heard mixed experiences—some swear they help while others say they complicate things further.
Is there any solid evidence on whether late fees actually prompt quicker payments, or is it just a hope?
I tried percentage-based fees but ditched them for something simpler:
Consistency is everything. Once I add fees, they stay - no negotiating.
The real benefit isn’t the fee money. It’s that clients respect your payment terms from day one. They know you’ll follow through, so most pay on time.
Only lost two clients over this policy. Both were already sketchy about payments anyway.
Late fees work if you enforce them. I charge 2% monthly after 30 days and I collect every time. No warnings, no grace periods - just send the updated invoice with fees the next day. People pay fast when they see you mean business. You may lose one in ten clients, but that is not a big loss.
Started charging late fees three years ago after a client paid four months late. Set it at 1.5% monthly after 30 days.
Most clients don’t even mention it when signing. The ones who complain? Usually not worth keeping anyway.
The real win isn’t collecting fees - I’ve only done that twice. It’s the leverage when chasing payments. Instead of ‘hey where’s my payment,’ you say ‘your invoice hits late fees tomorrow.’
Payments come faster now. Maybe it’s fear of fees, maybe it shows I’m serious about terms. Either way, it works.
I prefer flat fees. I charge $50 after 30 days.
Put everything in writing - that’s the key. When clients know upfront about late penalties, they usually stick to the schedule. Even if you don’t actually collect the fee, it sets clear expectations.
Sure, you might lose some clients, but those are probably the ones who’d pay late anyway.
Most clients will find a way to avoid the fees. I quit using them long ago.
I just ask for payment upfront on smaller jobs.