What to consider before charging clients for canceled appointments

Before you implement a policy of charging clients for canceling appointments, read these salient points on the subject by Chip Camden.

Fellow TechRepublic contributor Bob Eisenhardt sent me a message in which he expressed frustration about clients canceling appointments at the last minute. Many of Bob's clients are doctors, and doctors often state a policy of charging extra when patients cancel appointments without some minimum notice. Bob is thinking about implementing a similar policy. It seems only fair.

I can see the justice in this for someone who has to travel to clients' offices — especially if, like Bob, you have to cross a major metropolitan area such as New York City. A last-minute cancellation not only loses revenue, it still incurs the expense of doing business. It wouldn't make as much sense for someone like me who works from home and keeps appointments by phone and online meetings. If someone cancels, it takes me precisely two blinks to turn my attention to some other billable activity, and costs me nothing extra.

Another factor to consider is how much money you make from each client. If your typical client only generates a few hundred dollars of business each month, then a cancellation represents a significant chunk of the business you expected from them. On the other hand, you can more easily find it in your heart and wallet to forgive the loss of one appointment's revenue if your client is still going to write you a check for several thousand at the end of the month. In that case, a penalty for the inconvenience would seem petty.

You should also consider how much resentment a policy like this could generate. In Bob's case, I would expect little resistance from doctors who have the same policy towards their patients. On the other hand, small businesses that regularly bend over backwards for their own customers might consider this kind of policy a real slap in the face. Unless it's going to have a noticeably positive outcome, it's not a good idea to complicate your invoice with extra charges. It gives your client one more thing to contest. It may be better to raise your rates in general to account for your losses from cancellations.

If you do implement this policy, how much extra should you charge? If you charge too little, you'll seem ridiculous and petty. If you charge too much, you'll seem self-important and inconsiderate. You must find the right answer to that within your specific circumstances. Also, how late is too late? Twenty-four hours? The length of time needed to get to the client's office? Or the time it takes to schedule someone else in their place?

Finally, you should always be willing to make exceptions for exceptional cases. The death of a near relative or some other personal emergency gives you the opportunity to establish a human bond with your client by waiving the cancellation fee. Clearly show that you did so on your next invoice, but don't draw attention to it in the midst of their grief or crisis.

Everyone has an excuse for why they need to cancel; where you draw the line is up to you. One test might be: could you have reasonably expected them to make preparations that would have avoided the cause of the cancellation? Or perhaps you charge the fee by default, and only make exceptions when it feels right. What do you think?