Late fees

R

RobAPI

New member
Do you ever impose a late fee if your clients are late in making payment?
I know that a lot of people are late in making their payments for their hosting accounts but didn’t know if any hosts charge a fee for the customer.

A lot of other industries impose a fee for late payment but to be honest, I have never heard of a host doing it.
I think hosts are very easy on their customers because they know that there are so many options available to the customer that they could easily leave if upset in any way.

What are your opinions and thoughts on this?
 
RobAPI said:
I know that a lot of people are late in making their payments for their hosting accounts but didn’t know if any hosts charge a fee for the customer.
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Now you have heard of a host that does this: Scribehost charges late fees.

For accounts that are 30 days overdue and no contact has been made with us (they haven't emailed to tell us that they sent their payment, or that they lost their card and so can't make the payment until they get a replacement, or whatever), there is a 10% late charge (or a minimum of $2, whichever is greater) added to the outstanding balance. This was put into place because Scribehost (all web hosts, really) offer a recurring service. We don't take some months off and not administer our servers. Likewise, if clients can't pay on time, there should be some sort of cost associated with not honoring their portion of the agreement (the "pay on time" portion).

If a client contacts us ahead of time, we may decide to waive the fee. We've all had bad months - and if a client is in the middle of getting their credit card replaced because the old one was lost or stolen, that's beyond their particular control. If someone's sent a payment through the mail, the post might have lost their payment. Also, you've got to watch for patterns. There's one-off late payments, and then at the other end of the spectrum there's the client who has a monthly plan and can't seem to pay made on time 4 months out of 6.

On worries about driving the customers away...the decision was made that having a larger portion of the client base committed to paying on time was more important than appeasement of a small portion of problem accounts. If there's a client who's habitually late and really is deeply offended that Scribehost levies a 10% late fee after 30 days (same as the utilities in the US including power, DSL, cable, phone, and others, all of whom provide recurring services), they can take their habitually-late-paying selves to another web host.

I can see why some hosts may not want to deal with assessing late fees. It is extra work, and depending on what market you target, it may not be worth it. Also, you have to temper things like this with a little common sense so that you don't either slap late fees on *everyone*, or so that you inadvertently let people take advantage of you. This requires more work on your part.
 
RobAPI,

I don't even monkey with it.

I have a flat $10.00 late fee - even on my $4.95 per month accounts, payable if the invoice is not paid by the due date.

Habitual late payers, don't get a grace period, however most of my customers will get to slide for 60 days before I turn them off.

John
 
fallcreek, that sounds like a pretty good way to do things, and customers know about it before they signup.

Makes things a lot easier if people know there is one fee for everyone.

I think some of the people on smaller accounts wouldn't be so happy of paying a fee that is twice their monthly cost, but then again, it was their fault to run up the fine.
It's like getting a parking ticket for £25 that would have cost about £1 for a ticket to allow you to park somewhere.

Lesli, I think it is good having a bit of leniency when people are having problems.
Charging a % of the cost can seem a lot fairer to customers, especially if they are on low plans.

At the minute I don't charge customers when they are late, but I think I might change that as it is happening more and more with newer customers
 
Exactly right, they are told about the late fee at sign up, and since I use webhost ( www.wh57.com) for my invoicing, I edited the invoice to remind them of the late fee with each invoice, so there is no surprise.

I have VERY few complaints, and those few typically come from the habitually late.

I agree with Leslie's point that the few who will leave you because of a late fee, are the customers that will be late every month.

The competition for hosting customers is so strong that it is difficult enough to make a profit without paying yourself or a staff member to chase late payers.

I also don't accept automatic signups anymore. Most of the customers I've had payment issues with have signed up automatically, so now I or one of my sales people has a conversation with the customer ahead of time - that way we can make sure that the potential customer is actually ordering the package that will suit their needs, and that they know about our policies - not just late fees, but no adult or copyrighted materials, etc. - before signing up.

Webhost has a late fee component that charges a percentage, but frankly, even at 10%, a 50 cent fee isn't much incentive to pay the invoice in a timely manner. My bandwidth provider doesn't care if I haven't been paid - my bill is due on the 25th, so my customers are due on the 20th.

The other advantage is that you figure out early on who is going to be a problem customer so you can refer them to the competition!

:p

John
 
After day one being late and e-mail, then in 5 days a reminder and notification of account suspension with 2 days to respond, we then pull a full backup and clear the account to new (so they can't just take the stuff and run - it is up to all clients not paying for a backup service to backup their own) they get it back if they ask so we're not stealing it, just not hosting it ;)

We're trying to change the welcome e-mail to include if your going on vacation and won't be contactable please let us know the dates in case of any problems then we can deal with them automatically (meaning if you let us know we'll leave it till you get back)

Usually after several attempts we close the account, but keep the backup for a bit just in case of unusual circumstances.

One tip - we always ping the domain name, if the server IP isn't yours then they've moved :rolleyes:
 
Good points Decker.

We actually have a clause in our TOs that states that our customers are required to give us 30 days written notice of leaving and I have no problems billing people who have already left who don't do so - mainly because I got tired of finding out they had left when I got a nasty email saying to remove them from my billing software.

Just between us though - I usually don't press people for payment after they have left - as someone else pointed out, an unhappy customer who feels trapped isn't a good customer.

I've learned that most people who leave - didn't really understand what they were signing up for, or are going off line completely, not moving their site.

John
 
According to our TOS, we charge a $1 late fee when the account is not paid on time. After 7 days, the account is suspended.

Normally I send a second notice after 1 week and suspend the account if I haven't heard back withing another week. I don't remove the account until I have heard from them or otherwise determined they have actually moved. Like Decker mentioned, we ping or whois the domain to see if they are still active on the sever.
 
When I did web hosting I had the following predifned in my TOS and in my welcome letter.

1) Payment is to be paid prior to, or o the date specified by the invoice.

2) Accounts that are not paid within 3 days of their invoice due date received a 10% deliquent penalty

3) Accounts not paid within 10 days of the initial due date without prior written permission would have their account suspended and their data removed from the server (After a backup of course).
The client would then be charged a deposit fee (2 months of their current hosting bill) for us to restore their site and service. The deposit would be held until the client chose to terminate the account.

I tend to see that most people who end up in this situation pay the 2 months deposit fee and run. They were hoping that our business would be unorganized and somehow 'forget' that they were there. Fortunately for myself and the company, I had their only backup, which they are always willing to pay for. Sounds harsh, but like others have said, when I miss my bank loan payment, they dont juse say "Hey take your time, we understand" the repo item which I purchased witht he loan.
 
Vovex, we also have a policy of suspension, then charging for reconnection - and you have a good point about other businesses who do charge late fees for missed payments. Our time period may be longer, and we just freeze the account rather than removing it; but the general point is the same.

For those that do (or ever have, if you're a former web host) charge reconnection fees: any clients ever complain about it, either in the "question period" before signing up or when they actually have their account suspended?
 
Lesli, what do they have to complain about? That they can't pay a bill? As long as you state it, and they check the box saying they comply with it, they are at fault. I wouldnt waste anytime arguing this with a client. I would simply state "Sir, this was pre-defined in our TOS/AUP which you agreed to prior to signing up. I am sorry this happened but I am not able to remove this charge."

However if they were out of town at a funeral or something critical, I might make an exception, only once.
 
Mostly, that was more questioning to see what others had seen. I have had one client question the disconnection notice when they were looking for a host. They asked why there was one, and why it was as large as it was. Once I compared it to a reconnection fee that might be charged by, say, a utility company, they were fine.

At one time there was consideration of partially refunding the reconnection fee in steps: after 3 successive on-time payments, the client got half the reconnect fee credited back to their account. The idea was sidelined because:

1) how to deal with annual clients versus monthly clients (radically different pay schedules)? It didn't seem entirely fair to have monthly clients make more on-time payments before the refund, or give annual clients half their money with fewer successive on-time payments. The innate sense of fair play trips me up again :D

2) no one's actually been billed the reconnection fee yet.
 
I do charge late fees and so on, providing it is the fault of the client. If it is the fault of one of my employees, then I will not charge the client (For some reason my employees find it difficult to do yearly billing :confused: ).


I charge a 20% late fee normally. Therefore, if the client normally pays $10 per month, he'll pay a $2 late fee - and if he pays $40 per month, he'll pay an $8 late fee. I don't feel this is too much, and nor do my clients.

If I've not received payment from a client by the 20th of that month, his account is suspended. There'll then be a $10 reconnection fee. I won't terminate the account for two months after payment has not been received.

I feel the way I do things is fair, and to date no clients have complained. A late fee is supposed to be a penalty, and should "shock" the client and put him back on track with paying when payment is due. The reconnection fee is there to pay for the time and hassle of actually unsuspending their account. I only suspend the client twenty days after the payment date if payment isn't received, and only terminate the account two months after the date of payment if it hasn't been received.


However if they were out of town at a funeral or something critical, I might make an exception, only once.
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If they were at a family funeral, or something came up which was critical meaning they were unable to pay (Eg: Having a car accident, a heart attack, etc.) - I'd certainly let them pay when they are able to. I'm not sure in every country, however as far as I'm aware in certain countries - it's actually the law for a company to give you offtime when there is a funeral in your family. A funeral is a "special case" I think - I'd always give them time if there was a funeral; we all have family members, and how'd you feel if your account was closed because you were at a funeral and unable to pay? You need to put yourself in their shoes. (However, I'm talking about the death of a family member. The death of a friend is also distressing, however you should still be able to make payment)
 
Yes, I'd have to be with Leo on this one.

What you do webmultitude is somewhat harsh, don't you think? True - You should be firm and not let them "get away" with what they want. However, wouldn't it be best to first suspend the account and then after another ten days, simply terminate it?


Do you even contact them during those ten days? Maybe they've forgotten... or are unable to because they're in hospital or something like that. There are various legitimate reasons as to why someone cannot pay, and these should be taken into account.
 
Anjay said:
Yes, I'd have to be with Leo on this one.

What you do webmultitude is somewhat harsh, don't you think? True - You should be firm and not let them "get away" with what they want. However, wouldn't it be best to first suspend the account and then after another ten days, simply terminate it?


Do you even contact them during those ten days? Maybe they've forgotten... or are unable to because they're in hospital or something like that. There are various legitimate reasons as to why someone cannot pay, and these should be taken into account.
Click to expand...

From our TOS:

Payment
<snip>
3. Users who fail to pay by credit card within ten (10) days of their monthly payment due date will result in the immediate termination of their account(s).

It isn't harsh. :) It is simply a way to eliminate problems and has been fine so far on the client's end.

I think 10 days is plenty of time to get paid. The invoices are sent well before the due date to remind them, and if they have not paid by the due date I email them.

Clients have said they were going on vacation/would be away/etc. and have paid early.

:)
 
It seems webmultitudes clients haven't complained so far, so I don't think that you can really call it harsh.

His clients have agreed to his TOS when they signed up so they must not think it harsh. :)
 
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