It's not uncommon to see provisions for late fees and interest charges in contracts. Typically a provision for a late fee may add 5% of the payment after a grace period of 10 to 20 days. Also, an interest charge of 18% or 1.5% per month is often found in contracts. There are "legal" rates of interest you are permitted to charge [16% in New York for an individual and 24% to a corporation], but those limits to no apply in a default situation, so you can use the higher rate.
The problem with late charges and high interest charges on a defaulted payment is that it is more likely to cause additional friction with your subscriber.
I start with the proposition that retaining your subscriber is your number one goal. True, retaining a subscriber who pays you is what we are really addressing. You can have all the subscribers you want if you're not going to charge them. But subscribers don't make their payments for a variety of reasons, and not all of them warrant a severe penalty. Their reaction to your effort to enforce that penalty may push them over the edge to take a firm position that their relationship with you is over. You lose the subscriber.
There are two schools of thought regarding the late fee and interest charge. One is that those charges routinely be added when payment is late, and then sit back and see if the subscriber will pay it. The other is to take an aggressive posture, add the charges and then insist on payment when the next payment is due, defaulting the subscriber if the payment including the additional charges are not paid. You better have a strong contract and top attorney if you're going to take the aggressive approach.
My standard forms do not have late fee charges. Sure, you can add them, but I left it out for a reason, not because I forgot to put it in. I believe late fees can encourage and perhaps condone late payment. After all, if the contract terms expressly state payments due on the first of the month but if you don't pay then just add on the late fee, then two signals are being sent to the subscriber. My contracts with recurring revenue provide for payment on the first of the month [you can chose the frequency of course, i.e., monthly, quarter - semi - or annually] and if payment is not made you can declare a default accelerating the entire contract. Technically you can then negotiate any terms you want to reinstate that contract.
My contracts really don't bother with interest charges on a payment. If you declare a default however the contract [perhaps not all of them] provide for a high default interest rate. If the contract does not provide for an interest rate you will still get your state's legal interest rate. In New York the legal rate is 9% [ not to be confused with the highest legal rate you can charge an individual on a loan, which is 16%].
For those of you who want to add late fees and higher interest rates on late payments we can easily make those modifications to the standard alarm contract forms. WWW.ALARMCONTRACTS.COM