How the late fee is calculated
The calculator counts the calendar days between the invoice due date and the date you choose (today by default). If the invoice is not past due, the fee is zero. Otherwise it adds two parts, either of which can be zero:
- Flat fee: a fixed amount charged once, for example $25.
- Simple interest: unpaid amount × annual rate × days late ÷ 365. A monthly rate is converted to an annual rate by multiplying it by 12. Interest is not compounded, so interest is never charged on earlier interest.
The new balance is the unpaid amount plus both charges. Amounts are rounded to the cent at each step, the same way the invoice generator rounds totals.
Worked example
A $2,500 invoice was due on March 1 and is still unpaid on April 15, which is 45 days late. The terms say $25 flat plus 1.5% per month. Interest is $2,500 × 18% × 45 ÷ 365 = $55.48. The total late charge is $25 + $55.48 = $80.48, and the client now owes $2,580.48.
Writing late-fee terms that hold up
State the fee before the work starts: in your payment agreement, on the quote the client accepts and in the notes of every invoice. Say when the fee starts (for example, the day after the due date), whether there is a grace period, and how interest is calculated. Many states limit the interest rate or the size of a flat fee, and consumer contracts often have stricter rules than business-to-business ones. A short, polite reminder before the due date often gets an invoice paid without any fee at all.
Frequently asked questions
Can I charge a late fee if it was not in my invoice or contract?
Usually you should not. A late fee is easiest to collect when the client agreed to it in advance, in a contract, a signed quote or the payment terms printed on the invoice. Add your late-fee terms to every invoice from now on.
What is a typical late fee on an invoice?
Many US businesses charge 1% to 1.5% per month on the overdue balance, or a flat fee of $25 to $50. Some states cap the interest rate a business may charge, so check your state's limit before choosing a rate.
Is 1.5% per month the same as 18% per year?
With simple interest, yes: 1.5% × 12 = 18%. This calculator converts a monthly rate to a daily rate on a 365-day year, so 30 days at 1.5% per month gives slightly less than a full 1.5%.
Should the late fee go on a new invoice?
Either works. Many businesses send a new invoice for the late charges that references the original invoice number, which keeps the original record unchanged. The button above opens the invoice generator with the fee filled in.