If Your Customers Pay Late, Your Payment Terms Are the Problem

Trade credit is one of those business tools that feels harmless until it isn’t. You deliver materials, finish the job, send the invoice…and then you wait. And wait. Meanwhile, your payroll, rent, insurance, and suppliers do not take “Net 60” as a form of payment.

The good news is that most late-payment disasters are preventable. The key is structuring your accounts receivable (A/R) like a system instead of a hope. That means setting clear payment terms, using late-payment charges correctly, and enforcing them in a way that does not wander into usury territory (where “late fees” can be treated as unlawful interest).

This guide walks through common credit arrangements, late-payment penalties, and practical enforcement tools businesses use in Florida and Georgia to get paid while staying on the right side of the law.

Trade credit, in plain English

“Trade credit” simply means you let a customer buy now and pay later. It can be as casual as “send me an invoice” or as formal as a signed credit agreement with a credit limit, personal guaranty, and default interest.

Trade credit keeps sales moving, but it also turns you into a lender for that customer’s project. That’s why your paperwork matters. Courts typically enforce what the parties clearly agreed to in writing, and they are far less sympathetic when terms are vague or only appear on the back of an invoice after the fact.

Common credit arrangements (and when to use them)

Net terms (Net 10 / Net 30 / Net 45): This is the classic “invoice due in X days.” It’s simple and common, but it can be risky if you do not have a signed agreement confirming the terms, late charges, and collection remedies.

Progress billing or milestone payments: Common in construction and professional services. You bill as work is completed (mobilization, rough-in, final, etc.). This reduces exposure because you are not financing the entire job at the end.

Deposits and retainers: Especially useful for custom work, special orders, or tight-margin projects. A deposit reduces the temptation for a slow-paying customer to treat you like their bank.

Credit limits: If you extend revolving trade credit, set a limit. Credit limits are not about being unfriendly. They are about controlling the size of a potential loss.

COD or “cash on delivery” for high-risk accounts: If an account has a history of slow pay or disputes, COD can be the difference between a bad month and a bad year.

Your strongest move: a real credit agreement (before the first invoice)

If your business regularly invoices customers, a credit application + credit agreement is one of the best A/R tools you can adopt. It should do more than ask for a name and address. It should clearly spell out:

• Payment due dates and acceptable payment methods
• Late charges and when they begin
• Collection costs and attorney’s fees (when allowed)
• The right to suspend future deliveries/services for nonpayment
• Venue, governing law, and dispute resolution basics
• Personal guaranty (when appropriate)
• Security options (UCC-1 filing, collateral language, etc.)

Why does this matter? Because “terms printed on invoices” are often attacked as not truly agreed to, especially if the customer never signed anything and the invoice comes after the work is done.

Late-payment penalties: what’s enforceable (and what gets you in trouble)

Here’s where businesses unintentionally step into legal danger. Late-payment penalties usually come in two forms:

1) Late fees (a flat fee or percentage charge)

These are often easier to enforce when they are reasonable, clearly disclosed in writing, and structured as a true “late charge” rather than disguised interest.

Florida law has an important concept for certain commercial installment contracts: it allows a delinquency charge up to 5% of an installment when an installment is at least 10 days late, and it specifies that this type of delinquency charge is not deemed interest.

That’s not a one-size-fits-all rule for every invoice, but it highlights a theme courts care about: clarity, structure, and reasonableness.

2) Interest (often called “service charge,” “finance charge,” or “default interest”)

Interest can be enforceable, but it is where usury issues arise if the rate is too high or the charges are treated as interest by a court.

Usury basics (why it matters even in “invoice” situations)

Usury laws limit how much interest can be charged on certain obligations. The tricky part is that in both Florida and Georgia, usury rules are not limited to “loans.” They can apply to an extension of credit or a forbearance (basically, delaying collection in exchange for additional charges).

Florida: key guideposts

Florida generally makes it usury to charge more than 18% per year simple interest on a covered “loan, advance of money, line of credit, [or] forbearance,” with a major carve-out for obligations over $500,000, which are treated differently.

Florida also has criminal usury thresholds: charging interest above 25% per year (up to 45%) can be criminal, and above 45% can be a felony, under certain circumstances.

Georgia: key guideposts

Georgia has a specific statute for commercial accounts that allows interest after the account has been due for 30 days, up to 1.5% per month, unless otherwise provided in a signed writing.

Georgia also has criminal penalties for charging interest above 5% per month on certain covered transactions.

Practical takeaway: If you want to charge interest, don’t “wing it.” Put it in a signed agreement, and make sure the structure and rate are compliant for the type of transaction and the state law likely to apply.

How to enforce payment terms without triggering usury problems

The safest A/R setups usually follow a few common-sense rules.

Keep your terms clear and agreed to up front

If you want late fees or interest, get the customer to sign for it in your credit agreement or contract. Courts like clear agreement. They like less surprise.

Avoid stacking penalties that look like “interest by another name”

A common mistake is charging:

• 1.5% monthly interest plus
• a 10% “late fee” plus
• “administrative fees” that happen every month
• This can look like you are charging interest that exceeds legal limits, even if you used different labels.

Use “one-time” late fees carefully

A reasonable, one-time late fee can be easier to justify than a compounding monthly penalty that effectively behaves like high-interest lending.

Be cautious with compounding, daily accrual, and “minimum finance charges”

The more your charge behaves like an APR calculation, the more likely it is to be analyzed like interest.

Strong (and legal) ways to protect A/R besides “high late fees”

If your goal is to get paid, interest is only one tool, and it’s often not the best tool.

Personal guaranties (the payment pressure many businesses need): If your customer is an LLC with thin assets, a personal guaranty can be the difference between “eventually paid” and “never paid.” It also changes the negotiation dynamics fast.

Security interests and UCC filings: For product-based businesses, a properly drafted security agreement and UCC-1 financing statement can give you leverage if the customer collapses or a lender gets involved.

Construction lien and bond rights (when applicable): If you’re in the construction supply or subcontractor world, preserving lien or bond rights can be a much stronger collection tool than charging a big late fee. But timing and notice requirements matter, so these must be handled carefully and early.

The right to stop work or suspend deliveries: This is an underrated clause. If your agreement allows suspension for nonpayment, you can reduce your exposure before the balance becomes unmanageable.

The “collections ladder” that keeps you professional and effective

Most businesses collect better when they follow a predictable escalation path. Here’s a simple approach that stays readable and defensible:

1. Friendly reminder shortly before due date or immediately after
2. Past-due notice with a clear “pay by” date and payment link/options
3. Final demand referencing contract terms (late charges, suspension, collection costs)
4. Suspend future performance if your contract allows it
5. Formal demand letter from counsel
6. File suit, lien, or pursue other remedies based on the contract and facts

The magic is consistency. Customers learn you mean what your paperwork says.

Bottom line: structure beats stress

If you routinely extend trade credit, the goal is not to punish late payers. The goal is to make payment the easiest, most predictable outcome and to protect your business if it doesn’t happen. A well-built A/R system usually includes:

• A signed credit agreement with clear terms
• Reasonable late charges that do not create usury risk
• Strong non-interest protections (guaranties, security interests, lien strategies)
• A consistent enforcement process

Late-Paying Customers Shouldn’t Control Your Cash Flow

If extending credit feels riskier than it should, call DuFault Law now. We’ll help you enforce payment terms legally, confidently, and without exposing your business to usury or collection issues.

• Call us at (239) 422-6400
• Email us at contact@dufaultlaw.com
• Or Visit our Contact Page to schedule a consultation