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Comment by ttol | Hacker News Reader

This won't work in practice. There are laws in place to prevent sky-high compounding interest rates, late fees, etc.

I would suggest that you simply take 50%, or some other large portion of the project, up front. Then, as you near a milestone, ask for another piece of it.

Billing at the end in one large chunk and then charging enormous rates just means you're not de-risking on the on set, and you're screwing a customer relationship.

Also, industry norms are NET 30, and some customers may even operate, and push, on NET 90 terms.

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The reality is that almost no matter what you do, getting invoices paid is a hurdle and a pain. This isn't necessarily the clients being assholes or being cheap or being broke. It's just a law of nature.

It's not just invoices either. If you need clients to give you feedback, provide copywriting or do any other homework it can take too long. You'll walk out of a meeting. They will promise it by Friday. 3 months and 12 reminders later and you get it.

Agree. OP should work on better account receivable practices instead of pretending to be a loan shark.

Or you might go so far as say OP should work on knowing how to pick better customers, which would make his A/R life even easier.

I don't know that this is universally the case. Two of my clients pay all my invoices the next day.

No. you're right it isn't universal. There are six clients that pay on time. two are yours. Two Swedish guys & a moroccan company pay on time and there is one german cannery that paid in a timely manner four times. All the rest are always late.

I agree with everything you've said. But I do know from experience that charging a reasonable late fee (not the audacious scheme OP uses) is a common, legal business practice that is effective at preventing certain types of delinquent payments.

>> This won't work in practice. There are laws in place to prevent sky-high compounding interest rates, late fees, etc.

True, but payments for services rendered are generally not considered loans and usury laws don't apply.

If I was doing business with this guy, I would be upset with this policy:

10% per week, every week, starting from the first day that the invoice is overdue. That means that if your invoice is due on Wednesday, and by Thursday you haven't paid it, I'll charge you 10% of the invoice again on top of the original amount.

How is the following day 1 week late?

Also, I agree with you on the NET 30. He gives 10 days to pay, and thinks that is standard. Got to be kidding me.

I think he means each week or part thereof.

No, he definitely means the following day. He continues:

If by next Thursday you still haven't paid, then that 10% turns into 20%. If you leave it for a month, congratulations, your invoice is now 150% of the original.

4 weeks in a month.. so:

day 1: 10% day 7: 20% .. day 30: 50%

It only works if he charges 10% the very first day it is late.

That's what each week or part thereof means - you pay for each week and partial weeks are rounded up to whole weeks (so one day = one week, one week and one day = two weeks, one month is four weeks and two days so would be five weeks and so on).

ok... that makes sense.

No, day 7 is still 10%. Day 8, it bumps up to 20%.

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