Attorney Billing Software and Service

Charging Clients Late Payment Charges

By Phil Paisley, President – Interbill – Attorney Billing Software

About 70% of our attorney customers charge their clients a late payment charge when payment for a statement or invoice is more than 30 days overdue.

Some customers use a flat late payment charge, often $25; but most use an annual percent, charged like interest. The most common annual percent charged by our attorney customers is 8% which is .67% per month.

Due to federal and some state regulations about charging “interest”, we at Interbill strongly recommend to our customers that they never use the word “interest”. We also strongly recommend our customers use the words “Late Payment Charge”. A Late Payment Charge is a charge made when the payment is unanticipatedly late. Interest is almost always an anticipated charge and that anticipated charge must conform to certain regulations. Most attorneys who have joined Interbill as customers have changed their Representation Agreements to specify that they will charge a Late Payment Charge if the client’s payment is overdue.

Further cautions. If you have decided to compute a percent rather than a flat late payment charge amount (e.g. $25) you will want to compute the percent without creating a compound interest rate situation. You will want to compute simple interest which is more difficulty than computing compound interest. To arrive at simple interest, you have to deduct the late payment charged so far and all payments including the current payment before computing the Late Payment Charge.

The definition of “Overdue Payment” is tricky. We recommend our attorney customers use our Payment Due Date option if they are going to charge a Late Payment Charge. Most of our customers now use Payment Due Dates. Most customers use from 20 to 25 days from the date of the statement as their Payment Due Date. Our Attorney Billing Software automatically computes the Payment Due Dates. It also automatically computes Late Payment Charges.

Many of our attorney customers use the Late Payment Charge as leverage to speed up payment. Those attorneys often negotiate off about 30% of their Late Payment Charges to receive client overdue payments faster.

For more information on Late Payment Charges and Payment Due Dates and how Interbill Attorney Billing Software handles both, please email info@interbill.com. You can also call 800.733.9933.