It's tough because as a small business owners they know that its costly to
pursue when a client owes money. It's happened to me a few times.

You may want to charge customers by each job that you do and not monthly. I
started to do something similar on my end and it did not work out well.
Customers would not pay for large orders of office chairs and folding chairs.
Therefore, i just had to charge by each order of office chairs and folding
chairs.

There’s a difference between slow payers and no-payers. Slow payers are
just (intentionally-make no mistake) taking advantage of you because they
can. You have to decide if the volume of business they represent is important
enough to you to continue putting up with their delinquent ways. And, if
severing ties with them would damage your reputation with other clients. Best
advice I can think of is always keep it one hundred percent professional.
Nothing personal, just establish policies and follow them dispassionately.

No-payers, on the other hand, need to be identified as quickly as possible,
and cut off immediately. Again, the exploitation is intentional, and they
will get away with it for exactly as long as you let them. Think nothing of
filing a lien against someone, or entering a small claims action, for amounts
that exceed the costs to do so. You deserve to get paid, and they need to get
the message that they are legally required to honor contracts into which they
entered.

I'm not as concerned with late-paying clients...it's the ones that never pay that really bother me. That being said, we've learned to deal with some uncollectable accounts, however, if the amounts get too large, looking into the services of a collection agency might be our only real recourse.

It is unfortunately a growing problem with clients making late payments. In my eperience once a client makes a late payment you know that all future payments from that particular client will always be late.   We can make as many rules and regulations as we want but at the end of the day it will not make it any easier to manage such clients. One has to take a sensible look at the problem and decide on a plan of action for future dealings with these clients.  From my personal experience the more heavy handed your approach the less likely you are to retain such clients. Acting quickly and approaching the client and discussing a situation is always better than sending in the big guns. I have on many occassions ended up with very loyal clients if I come to a sensible, aggreed, method of dealings in the future. One method I have used on many occasions is to agree to accepting staged payments, for example if I usually charge a client monthly and he defaults I simply approach them quickly and ask if it would be helpful to them if we accepted regular weekly payments.   By applying this technique you have probably solved a cash flow problem for your client, who will be greatful for your early offer of help, whilst at the same time you have solved a cash flow problem for yourself and gained a long term trusting relationship with valued customer.        

You make want to check out these two articles Getting your Customers to Pay-Up: Part 1 - Tips for Protecting Yourself from Non-Paying Clients Getting your Customers to Pay-Up: Part 2 - Tips for Collecting from Non-Paying Clients JimD

The problem is that clients often deley in making their payments. On the one hand you can refuse from such non-paying clients from the very beginning. Acting in such a way you can avoid a lot of difficulties from the start. On the other hand, you are taking risk to lose some clients and therefore money.

If it not stated in your bill receipt that you would indeed charge a late fee or interest for any outstanding balance not paid of a specified days after. I would consult a lawyer and see what you can come up with. Also I would suggest to add this provision in your agreement so that you are informing your client at the same time you are covering the legal grounds. Also for good business sake give them a couple of extension, everybody is having it rough now a days :( Specially if they are good paying customer before.

I assume you mean charging interest element on the outstanding amount. Have you considered debt factoring ? This is selling your debts at a discount to banks or other financial organisations.

I agree with ksunheim, give them a chance, we all have our own diffeculties in life might be, he has a much more than we have, patience, just stay calm. Everything is can be arrange in formal talk. Client for sure they know thier obligation to where they render the service, for the fact that they might be needing the service in some other time. Jsut stay cool, and everything would be fine.