Back in the early 90’s I was an SAP Consultant with pretty good system / functional knowledge but not much corporate business experience. I remember proudly showing my client all the myriad ways they could define payment terms and how they would benefit from delaying vendor payments to the last minute but just in time before hitting penalties. It sounded all logical, and the system allowed it … but then my Client, (at a division of HP) turned around and said: We don’t do that. Are vendors are long term partners and we’re more interested in keeping them happy by paying early than in the short-term financial gains.
That was a good lesson in business – and the first thought that came to my mind reading about how Zoho Invoice now allows automatic assessment of late fees. Let’s face it, the whole economy is saddled with cash crunch, and in these hard times timely payment matters – so what better incentive than applying late fees? The system allows you to set up typical terms, e.g. a percentage or fixed fee per month, and whenever you create an invoice, you just include one of these predefined terms. Fair game, your customer is aware, so if they are late, the system can auto-calculate the applicable late payment fees.
If I were late with a monthly bill, I’m sure the utility company would apply similar logic and slap me with a late fee. But the utility company does not use Zoho Invoice- the typical users are small businesses, often individual freelancers. Now we all know the corporate practice of paying the “little guys” last, often several months late – but how practical is it to slap your customer with a late fee? Could it be the last invoice you get to spend to that customer?
Let’s go back to Zoho Invoice for a minute: it has another very convenient feature, the creation of auto-reminders. You can configure it to send emails about late payments to you, the customer directly, or both. The combination of auto-reminders with automatically applied late fees can have some rather unpleasant consequences.
Don’t get me wrong: these are all useful features, and clearly there are cases when the right decision is to charge the late fees, but you, the user have to retain control, and exercise judgement on what makes business sense. Just because you can, does not mean you should.