How the late fee is calculated
Most small businesses charge interest on overdue invoices as a percentage per month, prorated by the number of days the payment is late. This calculator uses simple (non-compounding) interest on a 30-day month, which is the most common approach on invoices, and then adds any flat late fee you charge.
Total due = Invoice amount + Interest + Flat fee
Example
A $2,400 invoice that is 45 days late at 1.5% per month accrues $2,400 × 0.015 × 1.5 = $54.00 in interest. With a $25 flat fee, the client owes $2,479.00.
Setting a fair late fee policy
- Put it in writing first. Late fees are far easier to collect when they appear in your contract or on the invoice before the work is done.
- Check your state's limit. Many US states cap the interest you can charge on commercial debts, often between 1% and 1.5% per month. When in doubt, check your state's usury rules.
- Give a grace period. A short grace period (5–10 days) keeps relationships friendly while still encouraging on-time payment.
FAQs
What is a typical late fee on an invoice?
1% to 1.5% per month (12%–18% per year) is common, sometimes with a flat fee of $25–$50. The amount you can charge depends on your agreement and state law.
Is the interest compounded?
No. This calculator uses simple interest, which is what most invoice terms specify. Compounding late fees can run into legal limits in some states.
Can I charge a late fee if it wasn't in my contract?
It is much harder to enforce. Add late payment terms to your contracts and invoices going forward so clients agree to them in advance.