Is client reacting reasonable?

Is client reacting reasonably when they are late paying tax?

Didn't find your answer?

Just wanted to share a situation to see what accounting colleagues think.

Started to chase a client for tax return information in October. Chased again in December, mid January (told client there would be a £100 fine if SATR filed late and they were comfortable with the £100 fine) , late January (got some information on 28th January), early February, early March and finally received all the required information in mid March. Have just completed the return and there is tax to pay of 10,000. I have also advised there will be a penalty of 5% because of late payment.

Client is very angry and says I should have told them there would be a late payment penalty in which case they would have got things to me sooner. They say they employed an accountant to make sure this sort of thing didn't happen because their lives were chaotic and they needed an accountant to keep them on the straight and narrow. By not telling them about the potential penalty they suggest I haven't done my job properly and by implication I should pay the penalty not them

Is that reasonable?

Replies (50)

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RLI
By lionofludesch
30th Mar 2017 13:29

No.

Get paid. Get rid.

He's trouble.

Having said that, I would've mentioned penalties as a stick to beat the information out of him.

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By PennyPincher
30th Mar 2017 13:32

No. You are an accountant not a babysitter, he had 9 months to get it to you from his year end so surely at some point he had one day spare to gather paperwork.

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By free-rider
30th Mar 2017 13:37

Get your invoice paid and advise them to look for another accountant.

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By Ruddles
30th Mar 2017 13:44

Agree with all of the above. But, out of interest, did you in fact advise client at any stage of the consequences of late-filing/late-payment? If not, you might have to accept a charge of not adopting best practice, and it may be a lesson for the future.

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By User deleted
30th Mar 2017 13:47

Didn't the countdown start on 6th April 2016? Some 300 days before the latest filing date.

"They" employed an accountant to; prepare their accounts and tax return. "They" did not employ an accountant to wet nurse "them". I'd be telling them to "go forth".

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By arthurallan
30th Mar 2017 14:02

Many thanks for the re-assurance.

Yes I did tell them in mid January about the penalties for missing the January 31st deadline (and advised they would escalate from April 30th onwards.

No I did not tell them about the 5% penalty for late payment and they feel if I had done then they would have got things to me sooner. My feeling is that why would they treat the 5% penalty with any more respect than the £100 penalty.

Did I have a responsibility to tell them about the 5%

It is the first situation I have had like this and must confess it makes me uncomfortable. Certainly won't let it happen again.

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Replying to arthurallan:
RLI
By lionofludesch
30th Mar 2017 14:13

arthurallan wrote:

My feeling is that why would they treat the 5% penalty with any more respect than the £100 penalty?

Well, it's five times as much so maybe they'd've had five times the respect.

I'd still dump them.

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Replying to lionofludesch:
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By Vaughan Blake1
30th Mar 2017 15:52

The dozy thing is that the client probably had no idea that they owed £10,000 and would not therefore have factored in the £500 to the decision! Having said that, I warn the latecomers about the 5% as a matter of course. I take a perverse pleasure in telling this type of client "told you so"!

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Replying to arthurallan:
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By Southwestbeancounter
30th Mar 2017 14:52

Yes I'm afraid its a typical client scenario 'where there's blame there's a claim!' I learnt the lesson you are learning many years ago - even the nicest client can turn into a beast when it comes down to them paying out money especially if we are talking about the sums involved in your case. Basically if you had mentioned the 5% surcharge (preferably in writing) then at least you would have been covered in that respect whether the client had got the accounting records in to you earlier or not. I'd do as others say - put it down to experience and move on. You don't need clients like that!

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Replying to arthurallan:
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By Lass
04th Apr 2017 11:17

I include a clause in my terms of engagement that does not hold me responsible for any penalties if records are not produced by a given time placing the onus on the client.

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By User deleted
30th Mar 2017 15:04

Generally and, like others have said on here, the client relationship is now soured and, there's little to be gained in thinking that this situation will improve.

I'll assume that, you've completed the return and, either been paid, prior to submitting the return or, you're still awaiting payment and have not submitted the return?

In any event, once you're paid, I'd be very tempted to write a letter explaining that you believe that it would be in everyone's interests for them to seek alternative advice.

Genuinely, you'll feel so much better. Try and do it, before the weekend. That glass of Guinness, real ale, pilsner, Carling etc etc, will taste so much better, across your break.

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By Matrix
30th Mar 2017 15:04

Do you have a copy of the penalty notice sent in Feb and does it refer to the 5%?

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By AlgernonB
30th Mar 2017 15:14

Reasonable, and your patience does you credit. Initial chasing for TR information with a mention of the £100 lfp, the need for info to calculate their precise tax liability and a warning about the possibility of escalating penalties if liability not paid when due should be enough to motivate even the most recalcitrant client. Get your bill paid and wave him goodbye.

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the sea otter
By memyself-eye
30th Mar 2017 15:46

I'm looking at a file at the moment - new contact (Feb 2017) missed the January deadline wants me to do his bookwork from Dec 2015! The first 3 months invoices/takings are missing and both a phone call and an email have not prompted any response. I'll get bored looking at it soon and tell them to sod off.
As others have said get tough, get paid get rid....

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Replying to memyself-eye:
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By Vaughan Blake1
30th Mar 2017 16:16

Took on one last year, 2014-15 late, surcharges, daily penalties etc etc. She asked about suing the previous accountant for incompetence. So I suggested she asked them for a contribution to the penalties and left it with her. Heard no more on that score.

Fast forward to January 2017, and guess what? No prizes I'm afraid. Now the end of March and I'm bored with the game. She does know about late filing penalties, interest, surcharges, daily penalties. So my "told you so" pleasure awaits.

One thing (of many!) that annoys me and causes me to shout at newspapers, are the articles in the press in mid January when the financial journalist bangs on about getting his stuff to his accountant, searching out lost invoices blah, blah. I think that this tends to normalise the January thing for people.

My, MTD will be fun!

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By cbp99
30th Mar 2017 16:12

What does your engagement letter say that might be relevant to this?

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Red Leader
By Red Leader
30th Mar 2017 16:18

This is in my April 2016 letter to clients:

"If for any reason your tax return is not completed by 31 January 2017, you should estimate and pay any tax due by that time in order to mitigate interest and surcharges. However, HMRC penalties for late submission of the return will still apply."

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Replying to Red Leader:
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By JDBENJAMIN
04th Apr 2017 12:14

(Comment deleted. It was in the wrong thread.)

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By adeyb
30th Mar 2017 16:21

To be brutally honest I'm glad I'm no longer in practice and have to deal with this hassle!!

I used to have to deal with exactly the same rubbish from the same 'clients' year in year out. Despite us (I worked at a small practice, sadly both my boss & colleague both died last year) warning them umpteen times they'd always hand us their books in either at the end of January or when HMRC sent them penalty letter.

They expected us to drop EVERYTHING and do their books and (surprise surprise!) these were some of the same clients who would be either bad payers or moan at their bills.

Why my old bosses kept I never know. Some were just awful (but extremely wealthy/tight) people...

Best advise from 27 years in the game and zero thanks... GET RID OF THEM!!!!

Good luck!

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wolfy
By rob winder
30th Mar 2017 17:15

If you told them there was a late filing penalty but not a late payment penalty they are going to lash out and look for someone to blame. If you had told them they would be penalised for late payment as well they have nothing to complain about.

At the end of the day it depends upon how much you want to keep them as a client. If you are earning good fees off them it might be worth (begrudgingly) paying the £500 penalty. If not tell them to take a run and jump and that if they had supplied the information when requested they wouldn't be in this predicament.

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By arthurallan
30th Mar 2017 18:34

As Greavesy used to say "funny old world, Saint!"

I decided to bite the bullet and let the client know that I felt they were being unreasonable and that it was hardly my fault they missed the deadlines after they had been chased a number of times before the end of January.

However rather than argue the toss I put it down to experience and advised the client I was going to write the bill off and they could look elsewhere next time.

Surprise surprise they apologised, said they would pay the bill and asked if I would stay on as their accountant!!

Unbelievable

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Replying to arthurallan:
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By Cheshire
30th Mar 2017 18:46

arthurallan wrote:

As Greavesy used to say "funny old world, Saint!"

I decided to bite the bullet and let the client know that I felt they were being unreasonable and that it was hardly my fault they missed the deadlines after they had been chased a number of times before the end of January.

However rather than argue the toss I put it down to experience and advised the client I was going to write the bill off and they could look elsewhere next time.

Surprise surprise they apologised, said they would pay the bill and asked if I would stay on as their accountant!!

Unbelievable

Did you send your disengagement letter? They may have apologised but generally such folk dont understand that, as my Mum used to say, sorry means one will not do it again!

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By Matrix
30th Mar 2017 18:41

Well done, do you still want to act? If so, bump up your fees and get paid in advance and tell him you will only send one chaser.

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By Southwestbeancounter
30th Mar 2017 18:48

'Nowt so queer as folk' as they say!! Oh well at least you can go home and have a nice glass of vino tonight and not have the worry of that hanging over you! Well done!

As Matrix says: do you still want to act though? Time for you to have the upper hand over this client methinks - you need to show him that if he's staying in your fold he plays by your rules from now on!

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By mbee1
31st Mar 2017 08:02

Glad it's all sorted. You can only hold a client's hand so far but it's good practice to explain the late filing and late payment implications in full which we do when we chase up each January.

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By Mr_awol
31st Mar 2017 12:48

I'm going to go against the grain a bit here and say that actually the client had a bit of a point.

You told him the deadlines, the penalty for late submission etc. He missed it. You could have disengaged him at that point but didn't, so should have advised him of the 'next step' (i.e. 5% surcharge).

Personally, when people are likely to get a late filing penalty I make sure I warn them of the 5% surcharge and point out for many of them that this is likely to be even worse than the flat £100. I often throw in the fact that if they continue to ignore it then they will go onto daily penalties eventually.

I appreciate that the previous answers have indicated that they see my approach as 'babysitting' but I disagree. Take the Companies House penalties - do you not warn clients that the penalties go up the later the accounts are filed? £150 is nothing, but the penalties get pretty substantial quite quickly.

Whilst I'm not wanting to wipe the clients' communal arses for them, I would say that not informing them of a progressive penalty regime could be argued as somewhat negligent, and making out it's all their own fault for missing the first penalty certainly doesn't equate to a good service.

Edit: I'm not saying the OP washed their hands of it and made out it's all the clients own fault - that is however something that seems to arise from the tone of some replies.

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PJ
By paulgrca.net
31st Mar 2017 13:25

So what's new! You have clearly not been in practice very long.

Certain types of clients are always like this you either deal with it (face them down) many back track as seems to have been the case here or raise the fee to such a level that they leave.

Occasionally you get one who does not leave but if you end up getting 2 or 3 times the usual fee then you need to weigh up if the hassle against the excellent fee.

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By Cardigan
04th Apr 2017 10:27

I agree with @Mr_awol in that it pays to be very clear on what the fines and penalties are.

There's nothing worse than spending half your time reminding clients about impending deadlines and chasing them for information and then spending the other half chasing payment.

But spending an extra 5 minutes on a cover your [***] email about the consequences of late filing can save a lot of hassle later on.

You could even add the fine/penalty info into your annual request for tax information, which I am now going to do. I normally used to just inform the usual suspects but it is worth informing everyone.

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By lh3f9764bg1g
04th Apr 2017 10:50

I never tell them anything specific about penalties . . . . . just semi-vague references. My view is that HMRC's correspondence to them explains the penalty situation adequately and any explanation that I would give would be a needless duplication of labour. Your client cannot say that they weren't informed . . . . . HMRC informed them. Your job is to do the accounts/Returns etc..
Chris.

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Replying to lh3f9764bg1g:
By Ruddles
04th Apr 2017 11:53

Relying on the defence that HMRC has already explained penalties as an excuse for not telling the client yourself is IMO poor practice. Other opinions are available.

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Replying to Ruddles:
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By lh3f9764bg1g
05th Apr 2017 11:11

We request information/documentation on 30th April each year. If it doesn't come in they'll get a reminder in the autumn. If it's not complete they'll get follow up requests - that's as far as I'm prepared to go. They are supposed to be responsible adults. They've been told by HMRC what the penalties are. How many communications is it supposed to take in a year to persuade them to act? Just wait until MTD kicks in and we may find that they'll all have to be weaned of their reliance on their agents constant nannying - otherwise said agents will spend half their working lives just communicating with their clients.
Chris.

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Replying to lh3f9764bg1g:
By Ruddles
05th Apr 2017 12:15

lh3f9764bg1g wrote:
How many communications is it supposed to take in a year to persuade them to act?

That's up to you. However, it makes good sense to specifically refer to penalties and surcharges in at least one of the reminders. It's all very well moaning to the client that HMRC have already 'told' them about penalties etc, so why should you have to bother, but surely better to avoid the argument with the client in the first place? But it sounds as though you don't hold your clients in very high regard anyway, so do as you will.

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Replying to Ruddles:
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By lh3f9764bg1g
06th Apr 2017 13:45

Goodness me! I don't think you could possibly know enough about me or my relationships with my clients to allow you to level the accusation that I don't hold them in high regard. Goodness me! And as for being a moaner . . . . . just listen to yourself! For your information we had two late 2016 Returns and they are still outstanding because . . . . . quelle surprise . . . . . we still haven't got the stuff we need. I suppose I'm supposed to warn them about July penalties coming up? Huh! They'd ignore any such reminders from me just as they have ignored the multiple reminders/warnings/penalty notices from HMRC. Goodness me!

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Replying to lh3f9764bg1g:
By Ruddles
06th Apr 2017 15:19

Well, if I were chasing those clients for info still then, yes, I would be advising them of the July penalties. But then I just believe in offering ALL clients a professional service, even the tardy ones - while at the same time giving them as little opportunity to complain as possible.

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By tonyaustin
04th Apr 2017 11:00

You should have warned about the 5% late payment surcharge because the client could have avoided it by making a payment of tax even though the tax return was not filed. Even if he had to guess the tax payable, he would have got any excess back when the return was filed or reduced the surcharge if he still did not pay enough. Did the client have sufficient funds to make a payment in January or February? Whether you were negligent and therefore liable depends on the precise facts and your terms of engagement. You should notify your PI insurers and see what they say.

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Replying to tonyaustin:
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By lh3f9764bg1g
05th Apr 2017 11:55

Negligent? If we were solicitors . . . . . would we be negligent if we failed to advise our clients not to break the law? Negligent seems like a very heavy word to me.
Chris.

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By edmundwright
04th Apr 2017 11:05

I may be missing something here, but if the bulk of the information only came to you in March, was it clear before then that there was a substatial liability for Tax?
If not, how could you warn them of a penalty on an uncalculated unknown and probably unpaid, liability?
It suggests, (much as I hate them) that a standard letter noting Late Filing Fees AND late payment penalties will follow if information is not with you in a timely fashion, may be useful.
Whether that really helps if the client says "I didn't read that part of the letter....."??

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Replying to edmundwright:
RLI
By lionofludesch
04th Apr 2017 11:26

I think you can always say "there's a 5% surcharge on tax unpaid at 2nd March" (or 1st March in a leap year).

I'm not saying I wouldn't still have been miffed if the client had said it was all my fault but - hey - you have to say there are things you could have done.

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By raybackler
04th Apr 2017 12:57

I don't think you should have to advise clients of the exact penalties.

In my engagement agreement it says that the client is obliged to provide all requested information in time to meet the deadlines, to pay any tax due on time, and that the client is responsible for any penalties if they don't comply. Job done.

I will always take into account the unexpected reasons why a client is late, particularly for those of long standing.

I make a point with new clients, when signing the agreement, that missing a deadline without good reason means that they are breaching my terms and conditions of doing business, never mind those of HMRC.

Persistent offenders, without good reason, end up as ex clients.

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Replying to raybackler:
By Ruddles
04th Apr 2017 13:09

Engagement letters serve a very useful purpose, but I detest with a passion the idea of hiding behind them as some form of defence against not adopting best practice.

How many clients read an engagement letter properly? ("That is their problem", I hear you cry.) Of those that do, how many remember its content in a few years' time? ("That is their problem", I hear you cry)

One shouldn't HAVE to advise clients of the exact penalties. But in the interest of providing the best service to the client, where is the harm in doing so? We've picked up a number of clients (good clients, as it turned out) that left their previous agent for that very reason - ie not being sufficiently proactive in reminding about payment/filing deadlines etc.

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Replying to Ruddles:
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By raybackler
05th Apr 2017 12:16

One of the key things I do is point out when taking on a new client that we do not tolerate late submissions or late payment, except in exceptional circumstances. I then show them the clauses that appear under the heading CLIENT OBLIGATIONS. I don't hide behind these clauses, they are an important element of the way we interact.

We remind all clients about the deadlines and do not hide behind our agreement at all. There is a difference between not doing our job and clients not doing theirs.

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Replying to raybackler:
By Ruddles
05th Apr 2017 13:42

There is also a difference between doing a job properly and professionally and in acting like a bucket shop accountant.

No-one has so far come up with a valid reason for not spelling out the penalty implications when reminding clients about deadlines.

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Replying to Ruddles:
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By lh3f9764bg1g
05th Apr 2017 13:46

Time?

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Replying to lh3f9764bg1g:
By Ruddles
05th Apr 2017 14:06

I said a VALID reason.

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Replying to Ruddles:
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By Southwestbeancounter
05th Apr 2017 14:29

You're dead right in my opinion Ruddles! Basically we need to have our clients' best interests at heart but also save our skins when it comes to potential litigation so why wouldn't you mention it?!

For the sake of a few minutes spent adding that bit to a letter (or even an acknowledged email) reminding the clients of penalties, interest and surcharges etc it could be time very well spent!

I got sued by a client once as I sent in a provisional tax return (based on best estimates with no books having been received at the time) to save them £100. They then tried to say that they didn't know what the word 'provisional' meant even though it was spelled out to them and that they signed it without fully understanding what it was! I've been in business nearly 30 years and had very little trouble from clients in that time thank goodness but believe me when a client wants to turn on you they will and it could get very costly and very nasty!

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Replying to Southwestbeancounter:
By Ruddles
05th Apr 2017 14:42

Spot on. Those few minutes spent now in adding a sentence or two to a standard letter/email would be far better than wasting time later in arguing with clients that they ought to have read the engagement letter properly.

So, actually, "time" is a very valid reason FOR reminding clients of penalties etc.

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By martinhayward
04th Apr 2017 13:40

I would have advised them of the 5% penalty and told them to pay something up front. Problem is that they, as many clients, don't see £100 as a problem.

Having said that they are being totally unreasonable in expecting you to pay for their tardiness and sound like the type of client who will always point the finger. Get rid of them! Good luck getting paid

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By North East Accountant
05th Apr 2017 10:15

Due entirely to their behaviour they have incurred this late payment penalty, so under no circumstances would I pay it.

It's their fault and they have to suffer the consequences.

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RLI
By lionofludesch
05th Apr 2017 11:48

There'll be no time for any reminders with MTD.

I'll be too busy.

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By mrme89
05th Apr 2017 15:23

I find it difficult to believe that people don't send routine chaser emails / letters from templates to save time.

It isn't really difficult to add in a little bit extra on the final chaser listing the penalties and interest. In fact, isn't this little bit extra what you should be using as a stick once your carrot hasn't worked?

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