Late Payment Fee Calculator
Calculate interest and penalties on overdue invoices. Choose simple or compound interest and add optional flat fees.
How Late Payment Fees Work
Late payment fees compensate you for the time value of money when a client pays after the agreed due date. They typically consist of an interest charge (calculated daily or monthly on the outstanding balance) plus an optional flat fee. Most jurisdictions allow reasonable late fees when disclosed on the original invoice.
Simple vs Compound Interest
Simple Interest: Interest = Principal x (Annual Rate / 365) x Days Overdue. Interest is calculated only on the original invoice amount.
Monthly Compound: Interest = Principal x ((1 + Annual Rate / 12)^months - 1). Unpaid interest is added to the balance each month, causing the total to grow faster.
How to Add Late Fees to Your Invoices
- State your late payment terms on every invoice (e.g., "1.5% per month after 30 days")
- Include the terms in your contract or service agreement
- Send a reminder before the due date and a notice when payment is late
- Check local regulations for maximum allowable interest rates
- Consider offering early payment discounts as a positive alternative
For a step-by-step invoicing process including late payment terms, read our guide on how to send a professional invoice. You can also review every detail your invoice needs with our freelancer invoice checklist.
Common Late Fee Scenarios
| Invoice | Rate | 30 days | 60 days | 90 days |
|---|---|---|---|---|
| $1,000 | 10% | $8.22 | $16.44 | $24.66 |
| $5,000 | 12% | $49.32 | $98.63 | $147.95 |
| $10,000 | 18% | $147.95 | $295.89 | $443.84 |
Frequently Asked Questions
Most businesses charge between 1% and 2% per month (12-24% annually). The most common rate is 1.5% per month (18% annually). Check your local laws, as some jurisdictions cap late payment interest rates.
Yes. Many invoices include a flat late fee (e.g., $25-$50) that applies once the payment is overdue, plus a daily or monthly interest charge that accrues over time. Both should be disclosed on the original invoice.
Simple interest is more common for short-term overdue invoices and is easier to explain to clients. Compound interest is sometimes used for long-overdue balances (90+ days) and results in higher charges over time.
In most jurisdictions, yes, as long as the terms are disclosed upfront and the rate is reasonable. Some states and countries have maximum allowable rates. Always include late payment terms in your contract and on each invoice.
Divide the annual interest rate by 365. For example, 10% annually = 0.0274% per day. Multiply by the invoice amount to get the daily interest charge: $5,000 x 0.000274 = $1.37 per day.
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