Do all SaaS companies in the USA put late payment fees in their contract?

Many certainly do.

Here is the standard clause in Salesforce’s MSA:

A late payment fee clause is a good idea, and especially, to place prominently on your invoices.

Why? As a start-up especially, you have few recourses if a customer doesn’t pay:

  • You can turn off their service. Yes, vendors owned by PE firms and the like do this all the time (Marketo did this to us, and turned us off for 3 days due to us admittedly forgetting to pay the renewal). But that can break the relationship, fast. Shutting off a mission-critical service for any reason other than true account termination is brutal on the customer, and thus, the customer relationship.
  • You can nag them incessantly to pay. This does sort of work. But it doesn’t always work with a procurement or accounting department.
  • You can create in-app notices. We did this. That worked pretty well. But some customers still just ignore them.

What else can you? Well, at least you can pretend there is a real cost to not paying on time.

So put the late payment fee in, and not just in the contract, but right on the invoice. So everyone knows they need to pay on time.

But don’t enforce it. It’s not enough money for all the drama. Instead, let them know this one time, you will waive the fees.

You may get a thank you then. Instead of a negative review, and perhaps even a cancellation.

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Published on May 18, 2019

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