How to handle late payments
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How to handle late payments I have a question regarding how to handle late member payments. We do have a $10.00 late penalty that is assessed to a member who is more than one week late in making their monthly payment. However, I'm wondering what valuation date to use with the late payment.
Here's an example (assume our valuation date is the first of the month and our meeting and therefore payment due date is one week later). Assume a valuation date of 1/1/2002 and a meeting date of 1/8/2002. Member X finally gets their payment turned in on 1/20/2002; do we use the 1/1/2002 valuation date just like everyone else in the club who paid on time or do we hold that money in suspense until next month and use the 2/1/2002 valuation date? Part of my concern is that with the way the market is behaving right now, the later valuation date unfortunately often has a smaller valuation and therefore the late member purchases more units than did the on-time members. In a strange way, late members are rewarded for being late which doesn't quite seem fair. How do other people handle this? One thought I had was to use either the valuation for the date the money was due or the one for the date the money was actually paid, whichever was larger. This would further penalize late payments. Is this legal? Is it fair? Any other suggestions? Paul, You should do whatever your partnership agreement says to do. If it isn't clear in the agreement, you need to adopt a policy. My club doesn't charge a late fee. We also do not require a set monthly payment (although we do have a recommended payment). All payments that are received by the meeting date buy units valued as of the end of the previous month (our valuation date). Payments received after the meeting are held for the following month. No matter what procedure you choose, there will always be a situation which will "seem" unfair. If you choose the next valuation date and the market goes down, the same number of dollars will buy more units. If you choose the last valuation date and the market goes up, the same number of dollars will buy more units. Just choose one and live with it. Ira Smilovitz Paul H. Stephan wrote: > I have a question regarding how to handle late member payments. We do have a $10.00 late penalty that is assessed to a member who is more than one week late in making their monthly payment. However, I'm wondering what valuation date to use with the late payment. > > Here's an example (assume our valuation date is the first of the month and our meeting and therefore payment due date is one week later). Assume a valuation date of 1/1/2002 and a meeting date of 1/8/2002. Member X finally gets their payment turned in on 1/20/2002; do we use the 1/1/2002 valuation date just like everyone else in the club who paid on time or do we hold that money in suspense until next month and use the 2/1/2002 valuation date? > > Part of my concern is that with the way the market is behaving right now, the later valuation date unfortunately often has a smaller valuation and therefore the late member purchases more units than did the on-time members. In a strange way, late members are rewarded for being late which doesn't quite seem fair. > > How do other people handle this? One thought I had was to use either the valuation for the date the money was due or the one for the date the money was actually paid, whichever was larger. This would further penalize late payments. Is this legal? Is it fair? Any other suggestions? we ran into this problem for a while, so we switched to a floating valuation date. everyone buys units valued on the day their contribution is received, irregardless of when that is. If they are not current by the time of a meeting (meaning they don't have the equivelant of the required contributions in) they cannot vote and are considered "late". we do not charge a fee though. as the treasurer, i've pushed everyone onto buyandhold's instant deposit though, so i move the money every month, guaranteeing on time payment. if your broker has any sort of ACH, you should consider that. Paul H. Stephan wrote: > I have a question regarding how to handle late member payments. We do have a $10.00 late penalty that is assessed to a member who is more than one week late in making their monthly payment. However, I'm wondering what valuation date to use with the late payment. > > Here's an example (assume our valuation date is the first of the month and our meeting and therefore payment due date is one week later). Assume a valuation date of 1/1/2002 and a meeting date of 1/8/2002. Member X finally gets their payment turned in on 1/20/2002; do we use the 1/1/2002 valuation date just like everyone else in the club who paid on time or do we hold that money in suspense until next month and use the 2/1/2002 valuation date? > > Part of my concern is that with the way the market is behaving right now, the later valuation date unfortunately often has a smaller valuation and therefore the late member purchases more units than did the on-time members. In a strange way, late members are rewarded for being late which doesn't quite seem fair. > > How do other people handle this? One thought I had was to use either the valuation for the date the money was due or the one for the date the money was actually paid, whichever was larger. This would further penalize late payments. Is this legal? Is it fair? Any other suggestions? John, Make sure your partnership agreement clearly states your procedure on late payments. Personally, I would never join a club that wouldn't let me vote on how to invest my money just because I'm late. In other words, I can understand not being able to vote on the use of new funds if I don't have my contribution in, but what about voting on the old money? Ira Smilovitz John Medio wrote: > we ran into this problem for a while, so we switched to a > floating valuation date. everyone buys units valued on the > day their contribution is received, irregardless of when > that is. If they are not current by the time of a meeting > (meaning they don't have the equivelant of the required > contributions in) they cannot vote and are considered > "late". we do not charge a fee though. > > as the treasurer, i've pushed everyone onto buyandhold's > instant deposit though, so i move the money every month, > guaranteeing on time payment. if your broker has any sort > of ACH, you should consider that. > > Paul H. Stephan wrote: > > I have a question regarding how to handle late member payments. We do have a $10.00 late penalty that is assessed to a member who is more than one week late in making their monthly payment. However, I'm wondering what valuation date to use with the late payment. > > > > Here's an example (assume our valuation date is the first of the month and our meeting and therefore payment due date is one week later). Assume a valuation date of 1/1/2002 and a meeting date of 1/8/2002. Member X finally gets their payment turned in on 1/20/2002; do we use the 1/1/2002 valuation date just like everyone else in the club who paid on time or do we hold that money in suspense until next month and use the 2/1/2002 valuation date? > > > > Part of my concern is that with the way the market is behaving right now, the later valuation date unfortunately often has a smaller valuation and therefore the late member purchases more units than did the on-time members. In a strange way, late members are rewarded for being late which doesn't quite seem fair. > > > > How do other people handle this? One thought I had was to use either the valuation for the date the money was due or the one for the date the money was actually paid, whichever was larger. This would further penalize late payments. Is this legal? Is it fair? Any other suggestions? John-- How do you handle everyone on the BuyandHold instant deposit? I thought only one bank account can be connected via instant deposit? Thanks, Jennifer John Medio wrote: > we ran into this problem for a while, so we switched to a > floating valuation date. everyone buys units valued on the > day their contribution is received, irregardless of when > that is. If they are not current by the time of a meeting > (meaning they don't have the equivelant of the required > contributions in) they cannot vote and are considered > "late". we do not charge a fee though. > > as the treasurer, i've pushed everyone onto buyandhold's > instant deposit though, so i move the money every month, > guaranteeing on time payment. if your broker has any sort > of ACH, you should consider that. > > Paul H. Stephan wrote: > > I have a question regarding how to handle late member payments. We do have a $10.00 late penalty that is assessed to a member who is more than one week late in making their monthly payment. However, I'm wondering what valuation date to use with the late payment. > > > > Here's an example (assume our valuation date is the first of the month and our meeting and therefore payment due date is one week later). Assume a valuation date of 1/1/2002 and a meeting date of 1/8/2002. Member X finally gets their payment turned in on 1/20/2002; do we use the 1/1/2002 valuation date just like everyone else in the club who paid on time or do we hold that money in suspense until next month and use the 2/1/2002 valuation date? > > > > Part of my concern is that with the way the market is behaving right now, the later valuation date unfortunately often has a smaller valuation and therefore the late member purchases more units than did the on-time members. In a strange way, late members are rewarded for being late which doesn't quite seem fair. > > > > How do other people handle this? One thought I had was to use either the valuation for the date the money was due or the one for the date the money was actually paid, whichever was larger. This would further penalize late payments. Is this legal? Is it fair? Any other suggestions? |
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