When a client in Ohio drags their feet on a progress payment, you act as an unsecured lender for their project. Every day that invoice sits unpaid past its net terms, your cash bleeds out as carrying costs. Understanding the state's prompt-payment statutes and allowable interest rates is fundamental for protecting your operating margins.
Ohio Revised Code (ORC 4113.61) dictates that prime contractors must pay subcontractors within 10 days of receiving payment from the owner.
Maximum Allowable Interest (Private): 18% annually
For public projects (ORC 153.12), the state pays within 30 days. Primes must pay subs within 10 days.
Maximum Allowable Interest (Public): 8% annually (or set by Tax Commissioner)
Consider a scenario where you are owed $60000 on a completed milestone, and the payment is 45 days past the statutory deadline or your contract terms. Based on common statutory limits, the carrying cost you might legally be entitled to recover can accumulate quickly. For example, if you applied an appropriate rate under Ohio law, the delay could cost the client an additional $1350.00 in interest.
You aren't just slapping an arbitrary fee on the invoice; you are recovering the actual financial damage caused by the delay, backed by state legislation.
To protect yourself, your master service agreement must include a clear, unambiguous clause regarding late payments. A recommended practice is to cite the maximum allowable rate under Ohio law as a cap, defaulting to the statutory rate if your contract rate is deemed usurious.
Interest terms must be consistently communicated. They should be printed on every single invoice you send, typically near the total due. Using a clear internal standard operating procedure (SOP) ensures these rules are applied objectively, removing emotion from the collections process.
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