Charging a Late Fee? Do they REALLY works?

[easyhostmedia]

With shared hosting you don't really have an immediate cost if the customer doesn't renew on time. Why penalize them?

They Legally sign and agreed to pay you on time, if they don't pay you then they have to pay a late fee penalty. you will find all utility companies (water, gas, telecom etc.) all do this if you dont pay ontime

With shared hosting you don't really have an immediate cost if the customer doesn't renew on time.

They are taking up space on your server that you could rent to someone else who will pay or are you in a business to give clients free space as they cant pay their bills on time

Fact is, people don't really read the terms of service. Most customers won't even know you have a late fee policy. A day or two late they come with intent to pay, see the late fee and now they have 2 options: Pay the invoice inc late fee or move to another provider.

That is not your problem, buy using your services they accept and agree to your TOS whether they have read them or not.

I never once had anyone leave because their invoices had a late fee added, they either paid it or contacted me and i removed it.

The whole point of late fees is not for client to keep paying them, but to make them aware if they dont pay their invoices on time it will cost them more. Mine was set at 20% or £2 whichever was greater.

 

[Artashes]

They are taking up space on your server that you could rent to someone else who will pay or are you in a business to give clients free space as they cant pay their bills on time
[...]
That is not your problem, buy using your services they accept and agree to your TOS whether they have read them or not.

You are looking at it differently I guess.

I've never been an operator, but I have to side with Alex - A2 Hosting on this issue.

The "taking up space" is so minuscule in terms of cost that losing a client over a small late fee completely outweighs it. Now what do you think is going to be received better by the client: fees thrown at them or a helping/understanding/flexible hand?

You certainly can act strictly by TOS, you can throw the book at clients all you want, that however doesn't change the fact that a client can walk away from your service if he feels the service isn't being "friendly". As much as you have the right to charge the fee, a client has the right to walk away.

 

[easyhostmedia]

You are looking at it differently I guess.

I've never been an operator, but I have to side with Alex - A2 Hosting on this issue.

The "taking up space" is so minuscule in terms of cost that losing a client over a small late fee completely outweighs it. Now what do you think is going to be received better by the client: fees thrown at them or a helping/understanding/flexible hand?

You certainly can act strictly by TOS, you can throw the book at clients all you want, that however doesn't change the fact that a client can walk away from your service if he feels the service isn't being "friendly". As much as you have the right to charge the fee, a client has the right to walk away.

Late fees are just part of it, if you offer an excellent service in server reliability and support service, then clients will be fine paying such small fees if they don't pay on time rather than leave.
One way to eliminate late fees is to get clients to pay by recurring payments, but that does not always work as i had 1 client who his PP subscription kept getting cancelled due to lack of funds (PP try 3 times to take the funds), so why should a client not have to pay such a fee when PP would try 3 times to take the funds

 

[Artashes]

Late fees are just part of it, if you offer an excellent service in server reliability and support service, then clients will be fine paying such small fees if they don't pay on time rather than leave.
One way to eliminate late fees is to get clients to pay by recurring payments, but that does not always work as i had 1 client who his PP subscription kept getting cancelled due to lack of funds (PP try 3 times to take the funds), so why should a client not have to pay such a fee when PP would try 3 times to take the funds

It certainly works for when the client is consistently late.

When this happens once or twice, and the late fee is thrown at them, I see the mood of the client change rapidly. The industry is way too competitive to lose a customer over $2.

 

[easyhostmedia]

It certainly works for when the client is consistently late.

When this happens once or twice, and the late fee is thrown at them, I see the mood of the client change rapidly. The industry is way too competitive to lose a customer over $2.

If you offer a good overall service then a client wont leave over $2, as anyone that uses late fees will tell you its the last thing you want is clients paying late fees, you want them to pay on time as you as a host have bills to pay which you have to pay on time, so why let your clients off for not paying their bills on time. If a client cant pay on time then they can easily contact their host and explain. A late fee is to encourage clients to pay their bills on by the due date.

like i used issue invoices 14 days before the due date and then a reminder was sent 1 day before due date and then again on due date, then an overdue notice 1 day after due date, then another reminder 2 days after due date and then 3 days after due date a late fee added and account suspended then 14 days after due date the account would be terminated if still not paid.

so in effect 17 days to say they they will be late paying before late fee added

 

[here-host]

I think the "late fee" is created to make sure that the client will pay the service on time, but the service must not be something like VPS that costs 3 euro. We must talk about "late fees" only in dedicated servers. Because if the service is not paid on time, it could be rented by someone else, who will pay it NOW and you will not lose money for that period.

 

[easyhostmedia]

I think the "late fee" is created to make sure that the client will pay the service on time, but the service must not be something like VPS that costs 3 euro. We must talk about "late fees" only in dedicated servers. Because if the service is not paid on time, it could be rented by someone else, who will pay it NOW and you will not lose money for that period.

A VPS could be rented to someone else
The space on your server (shared or reseller) they are taking up without paying could be rented to someone else.

 

[BlaZe]

I think the "late fee" is created to make sure that the client will pay the service on time, but the service must not be something like VPS that costs 3 euro. We must talk about "late fees" only in dedicated servers. Because if the service is not paid on time, it could be rented by someone else, who will pay it NOW and you will not lose money for that period.

A VPS does take up resources. So if the client does not renew, hogs up the resources, he/she/it should be liable to late fees unless stated otherwise that they will be discontinuing the VPS, that way the host can free up the resources on the node.

 

[easyhostmedia]

A VPS does take up resources. So if the client does not renew, hogs up the resources, he/she/it should be liable to late fees unless stated otherwise that they will be discontinuing the VPS, that way the host can free up the resources on the node.

Exactly as they are still taking up space and resources on the server whether it be a shared, reseller, VPS, Dedicated server.

 

[Alex - A2 Hosting]

They Legally sign and agreed to pay you on time, if they don't pay you then they have to pay a late fee penalty. you will find all utility companies (water, gas, telecom etc.) all do this if you dont pay ontime

Again, a bad user experience. I'm not approaching it from the legal agreement side.

They are taking up space on your server that you could rent to someone else who will pay or are you in a business to give clients free space as they cant pay their bills on time

Eh. Unless you operated with very minimal free capacity I don't consider that a valid point .

That is not your problem, buy using your services they accept and agree to your TOS whether they have read them or not.

Totally agree. The point was about the user experience however.

I never once had anyone leave because their invoices had a late fee added, they either paid it or contacted me and i removed it.

I am glad you didn't experience that however I feel your client base size was pretty small. I'm sure the case would be different if managing tens of thousands of customers.

Mine was set at 20% or £2 whichever was greater.

Ouch.

Late fees are just part of it, if you offer an excellent service in server reliability and support service, then clients will be fine paying such small fees if they don't pay on time rather than leave.
One way to eliminate late fees is to get clients to pay by recurring payments, but that does not always work as i had 1 client who his PP subscription kept getting cancelled due to lack of funds (PP try 3 times to take the funds), so why should a client not have to pay such a fee when PP would try 3 times to take the funds

Because the customer might be having a rough time. Because you're not having to absorb any of PayPal's processing fees. Because 1000 other reasons.

If you offer a good overall service then a client wont leave over $2, as anyone that uses late fees will tell you its the last thing you want is clients paying late fees, you want them to pay on time as you as a host have bills to pay which you have to pay on time, so why let your clients off for not paying their bills on time. If a client cant pay on time then they can easily contact their host and explain. A late fee is to encourage clients to pay their bills on by the due date

I'll say what I said above, I imagine your client base was very small. When you have tens of thousands of customers you will see people leave for this kind of practice.

You have bills to pay sure but assume you're selling a hosting package for $10. The customer is going to be a tad late. They see their invoice and they're now due $12. If the customer decides to leave, now you're out $120 annually over that $2. Causing a knock on effect on your statistics -- churn, customer and revenue growth etc.

 

[PeterShene]

Waving late fees is a shortcut to the grave for most business. Time is money.

I would say keep your client experience, I would rather have a business that is making money. Whats the point of having superb client experience for people that dont pay... I am a nice guy and all but not that nice haha.

Lets say a client is 10 days late that 3.3 dollars owed to you is money that is meant to be invested in growth its not just 3.3 dollars its 3.3 dollars and 10 days of growth on that 3.3 dollars. Sure bad ux may make them leave, from m y experience however late payers rarely do it just once, and the once that really have a problem usually do contact you. For them i would make consideration.

If i take a quick look around my countries best and biggest hosts heck even just business in general, they are all very strict on payment. They usually start reminding you way before the due date. I think this is key to reducing late payments. Those that are late are suspended.. this forces the client to make payment for their website/hosting without any real conflict and to them it seems fair as you have been telling them due dates for a while now.

I dont see any companies that wave late fees or even offer a grace period, I am certain its been tried and I am certain they soon went out of business.

 

[Alex - A2 Hosting]

Can't believe this thread is still going but why not

I would say keep your client experience, I would rather have a business that is making money. Whats the point of having superb client experience for people that dont pay... I am a nice guy and all but not that nice haha.

Look at the bigger picture though. Sure you want that $2 now. What is your average cost to acquire a new customer? I won't reveal ours of course but lets say yours is $150-$200. If you lose that customer over $2, you're paying $150-$200 to gain a new customer just to replace them. Now you haven't grown at all, you're where you was the day before but now far more out of pocket.

You will be fighting your own growth by losing customers to these reasons.

Lets say a client is 10 days late that 3.3 dollars owed to you is money that is meant to be invested in growth its not just 3.3 dollars its 3.3 dollars and 10 days of growth on that 3.3 dollars.

I dont see any companies that wave late fees or even offer a grace period, I am certain its been tried and I am certain they soon went out of business.

Look at the top 10 global providers (feel free to share them here). I think you'll find a grace period with them all at the very least. Larger providers understand fighting your own marketing efforts to grow your business just does not make sense.

 

[eagle531]

Late fees don't work because you will loose a lot of clients.

 

[easyhostmedia]

Late fees don't work because you will loose a lot of clients.

If you do it right and make sure your clients know how it works then you will not lose any clients and if you do lose a few clients then these clients you don't want anyway.
Late fees are their to encourage clients to pay their fees on time as at the end of then day you have bills to pay and if all your clients paid late then how would you pay your bills on time.

Late fees dont have to be high, something like $2 or 20% of monthly fee whichever is greater

 

[Hostlic]

When you're contractually obligated to pay a bill at scheduled intervals, I wonder why anyone wouldn't expect late fees if they don't pay on time. If they migrate elsewhere, don't you think they're going to do the same to that provider?

 

[Terrum]

Only 10% of the time my clients have agreed to pay a late fee, it's a matter of principle at the end of the day - but unfortunately clients do not understand the resource taken to store a service weeks after expiration, then expect to just pay the normal price after a safe storage of their data.

Best thing to do is to write in your contracts/T&C that you are not responsible for any data after expiration

 

[PeterShene]

What we do is post revision requests and state 1/3, 2/3 and 3/3 on the third the final amount is due. I disagree the that there is a mount that is is low enough for you to forfeit it due to industry competitiveness. THe time you are spending chasing this guy could have landed you another client that pays on time. Looing into the future late payers are not a good representation for the most part of people id like to work with. So Its charged if they don't pay ownership is not transferred and the website is repurposed and sold at a cheaper price to regain our losses. My big issue with late payments and why I try to avoid that situation altogether is $50 3 months ago ( presuming you put it into your business ) could have generated you $150 dollars. Secondly $50 4 months ago usually has less value than $50 now.

 

[easyhostmedia]

Only 10% of the time my clients have agreed to pay a late fee, it's a matter of principle at the end of the day - but unfortunately clients do not understand the resource taken to store a service weeks after expiration, then expect to just pay the normal price after a safe storage of their data.

Best thing to do is to write in your contracts/T&C that you are not responsible for any data after expiration

Just place your payment schedule within your TOS, so your clients know when you generate invoices, when you generate reminders, when you suspend sites, when you generate late fees and how much this will be, when you will terminate sites.

This way they have no come back.

Late fees dont need to be high as its just used to encourage users to pay on time as you yourself have bills to pay, so if you have to pay your bills then why should your clients not pay theirs.