Interest / late penalties on invoices

[Macho Philipovich]

Thanks David.

Since the goal is to make it as convenient as possible for clients to
pay, I'd really like to present them with a simple document that clearly
indicates the total outstanding amount owing, rather than a series of
invoices they have to try to sum up.

Perhaps the solution is to send all the invoices with a cover sheet
listing the total, but that also seems unnecessarily complicated.

If anyone has any further thoughts I'd be happy to hear them.

Thanks,

Macho


On 2017-08-04 09:56 PM, DaveC49 wrote:
> Macho,
>
> From an accounting perspective, the interest charge is not incurred until
> the original invoice is overdue past the agreed date and should be recorded
> as such at that time, while the original sale is recorded at the date at
> which it occurred.
>
> On this basis, I think it would be most appropriate to issue an additional
> invoice for the interest charges referencing the original invoice at the
> date those charges become applicable and then forward a copy of the original
> invoice along with the invoice for the interest charges to the customer. If
> the invoice remains outstanding, then you would have to periodically e.g
> monthly or quarterly send  new invoices for the accruing interest charges. 
>
> In mananging this for low value sales, the additional cost of issuing and
> mailing the additional invoice may outweigh any additional gain from the
> interest charge, so it may be wise to have a threshold in the sale value,
> above which you change the terms of sale to include the interest charge for
> late payment, or more simply, not pursue the interest charges for sales
> below an appropriate threshold while keeping the provision in the terms of
> sale. 
>
> You may also need to consider any constraints on policy imposed by any
> consumer protection legislation which may apply.
>
> It would be interesting to compare the effectiveness of offering a discount
> for early payment with the imposition of an penalty interest  (or using
> both) in encouraging prompt payment of invoices. Carrot or stick cf carrrot
> then stick?
>
>
> David Cousens
>
>
>
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> David Cousens
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