Question

Which of the following is/are most appropriate to add to an overdue client bill?

1) Interest only
2) Statement fees only
3) Penalty fees only
4) Interest and statement fees
5) Interest, statement, and penalty fees

Answer 1

To compensate the business for an overdue bill, including interest, statement fees, and penalty fees is most comprehensive, aligning with option 5, subject to contractual terms and business practices.

Step-by-step explanation:

When considering which charges are most appropriate to add to an overdue client bill, one must consider the terms of the contract and standard business practices. Based on the given information:

1. Interest may be added as a cost for the time value of money that the business did not receive because the payment was late.
2. Statement fees could cover the costs associated with preparing and sending additional billing statements due to the delay in payment.
3. Penalty fees are designed as a deterrent to encourage on-time payment in the future, which, in the provided example, are $10 for a late payment and $5 a day each day the payment remains unpaid.

Therefore, the most comprehensive approach to compensating the business for the overdue bill would likely include all three: interest, statement fees, and penalty fees, which corresponds to option 5 in the list. However, this approach can vary based on the industry standards, laws, and specific conditions agreed upon between the clients and the business.