Excuse 8: Other people don't charge

Applicability

All, although this generally only makes sense for the first penalty

Underlying reasons

Customer understands that penalties are a law, but feels we are the only supplier that actually charges
Penalty charges apply to all commercial contracts and so apply to other suppliers too Paying other suppliers late creates a liability to pay the penalty charge, one which can come back up to 6 years later With charges of at least £40 per late paid invoice over up to 6 years for each supplier the liability could add up to a lot You should correctly declare assets and liabilities on accounts or else possibly be defrauding shareholders If any other supplier went bust then the liquidator should collect all payments due, and penalties are almost impossible to argue and could be a lot
Customer does not believe they have an obligation to adhere to the agreement they have made
Whether we charge penalties or not should not be an issue - it only applies if the customer breaks the contract and pays late. Customer probably has a fundamental misunderstanding that they don't have to do what was agreed, but that it is fair to do whatever they can get away with and feels aggrieved that they failed to get away with paying late when they usually do (with other suppliers).

Resolution

A credit of the first penalty works well, as long as the customer is educated and understand the next time they will not get a credit
Explain that they should stick to their agreement, and if they did then the penalties would not be an issue
Explain that they should stick to the agreement with all suppliers, not just us, as they are running up a liability and risk by hoping they have got away with paying late all the time. Only where suppliers have individually agreed after each debt that penalties will not be applied to that debt, in return for something, would the penalties not later be enforcable (up to 6 years later).
Point out that people like British Telecom charge late payment penalties - so other people do charge
Point out that if any of those other suppliers go bust the liquidator would be irresponsible if he did not pursue the 6 years worth of late payment penalties. Even if liquidators think it too much hassle there are bound to be businesses that will buy that debt off them for a small fee and pursue the charges as they are so easy to enforce in court.

It is worth noting that at least one company we deal with does not pursue late payment charges deliberately. His business is one where people sometimes take services for a couple of years and then go to someone else. He also has a lot of customers that pay late as a matter of course. He does not even mention late payment penalties. When the customer does leave, and there is no longer any good will to maintain, he simply charges the last 6 years worth of penalties. We think this is a bit unreasonable which is why we make the charges immediately, but it is a risk that customers take with all of the other suppliers not apparently charging them. It would not take much for a common accounting software to be updated to show penalties due, or some test case in the courts, to suddenly make every supplier aware of late payment penalties and back date them 6 years to all customers when the leave.