How this late fee is calculated
The calculator uses simple interest. The daily charge is based only on the original invoice amount, so interest does not earn further interest. A monthly rate is treated as covering 30 days and an annual rate as covering 365. If your contract uses a different method, follow the contract.
The flat fee is applied once, and only after any grace period has passed. Days inside the grace period are not charged.
The formulas
Days charged
Days charged = Days past due − Grace period (never below 0)
Monthly rate
Interest = Amount × Rate ÷ 100 × Days charged ÷ 30
Annual rate
Interest = Amount × Rate ÷ 100 × Days charged ÷ 365
New total
Total = Amount + Interest + Flat fee
Worked example
A $2,400 invoice is 45 days past due. The terms allow a 15-day grace period, then 1.5% per month, plus a $25 flat fee.
- Days charged: 45 − 15 = 30 days.
- Daily interest: $2,400 × 1.5% ÷ 30 = $1.20.
- Interest: $1.20 × 30 = $36.00.
- Late charges: $36 + $25 = $61.00, for a new total of $2,461.00.
Before you add a late fee
- Check that it was agreed. A late charge is much easier to enforce when it appeared in the contract or in the invoice terms before the work began.
- Check local limits. Rules on late charges and interest differ by place and by whether the customer is a business or a consumer. This site does not track those rules.
- Send a reminder first. A polite reminder that shows the amount, due date and accrued fee will often get a response, and it keeps the relationship intact.
- Keep your terms simple. State the rate, when it starts and the payment methods on every invoice. The invoice total calculator helps with the invoice itself.
Frequently asked questions
Can I charge a late fee if it was not in my contract?
That depends on where you and your customer are and on the type of contract. Terms agreed up front are the safest route. Ask a legal professional if a large amount is at stake. Some places have laws on late business payments that may apply.
What rate should I put in my terms?
Choose a rate that fits local rules and that you would be comfortable enforcing. Limits vary and may change, so this site does not recommend a specific number. A lawyer or your trade association can give current guidance.
Does this compound?
No. Interest is simple, calculated on the original amount only. If your agreement calls for compounding, this calculator will show a lower figure than your contract allows.
How can I avoid late payments in the first place?
Take a deposit, invoice promptly, offer easy payment methods and send a reminder before the due date. You could also try an early payment discount to reward quick payers.