How to Calculate Late Fees on Invoices (Formula + Examples)
A client is 30 days late. Can you charge a late fee, and how much? The answer depends on what your terms say — and the maths is simple once you know which method you use.
Step 1: check your payment terms
In most places you can charge only what your contract or invoice terms say (the UK is an exception for business invoices — see below). A typical clause: “Payment due within 30 days. Overdue amounts carry interest of 1.5% per month and a $25 late fee.” Add terms like this to every invoice with the invoice generator.
Step 2: pick the method and calculate
| Method | Formula | $2,000 invoice, 30 days late |
|---|---|---|
| Flat fee | fixed amount | $25.00 |
| Monthly interest | amount × monthly rate × months | 2,000 × 1.5% × 1 = $30.00 |
| Yearly interest, daily | amount × yearly rate ÷ 365 × days | 2,000 × 18% ÷ 365 × 30 = $29.59 |
| Flat fee + interest | both | $25 + $30 = $55.00 |
Interest is normally simple (on the original amount only), not compounded, unless your terms say otherwise. Count days from the day after the due date. The late payment calculator counts the days and does every method for you.
UK: statutory interest on business invoices
Under the Late Payment of Commercial Debts (Interest) Act, a UK business can charge another business interest of 8% above the Bank of England base rate, plus fixed compensation of £40 (debts under £1,000), £70 (£1,000–£9,999.99) or £100 (£10,000 or more) — even if the contract says nothing. Daily interest = amount × (8% + base rate) ÷ 365.
US and elsewhere
Many US states limit the interest rate you can charge, and consumer invoices have stricter rules than business ones. 1–1.5% per month is common, but check your state or country before setting a rate. This is general information, not legal advice.
Ask before you charge
- Day 1–3 after the due date: a friendly reminder with the invoice attached.
- Day 14: a firm reminder that states the late fee from your terms.
- Day 30: a final notice with the new total and a deadline.
The late payment calculator includes ready reminder emails in all three tones. Most clients pay after the second reminder — the fee is your backup, not your goal.
Frequently asked questions
How do I calculate a late fee on an invoice?
Use the method in your payment terms. For monthly interest: invoice amount × monthly rate × months late. For yearly interest charged daily: amount × yearly rate ÷ 365 × days late. A $2,000 invoice 30 days late at 18% a year costs about $29.59.
What is a normal late fee?
Common terms are 1–1.5% per month on the unpaid amount or a flat fee such as $25. Check local law: many US states cap interest, and in the UK business invoices can carry statutory interest.
Can I add a late fee if it was not in my terms?
Usually not, unless the law gives you the right (as UK statutory interest does for business-to-business invoices). Put your late-payment terms on every invoice and contract from the start.
