Late fee calculator

How the late fee is calculated

The calculator uses simple interest: amount × rate × (days overdue ÷ days in the rate period), plus any flat fee. With a rate of 1.5% per month, a 1,000 invoice that is 60 days late accrues 30 in interest. Because interest is simple, it does not compound on itself, which is also the easiest version to explain to a client.

Setting late-fee terms that hold up

• Agree it before the work. A late fee that only appears after the invoice is overdue is hard to enforce. Put it in your quote, contract or the invoice terms.
• Check your state's limit. Many US states cap the interest rate you can charge on overdue commercial accounts. 1–1.5% per month is a common range.
• Use a grace period. A few days' grace avoids penalising honest mistakes and keeps good clients happy.
• Be consistent. If you waive fees for some clients, it becomes difficult to charge others.

Flat fee or percentage?

A flat fee is simple and works well for small invoices, where a percentage would be pennies. A percentage scales with the amount owed and keeps growing the longer the invoice is ignored. Many businesses combine the two. Start by working out the original due date, then add the late-fee wording to your next invoice.

Note: this tool is for estimates and is not legal advice. Check the rules in your state and in your contract.

Frequently asked questions

How do I calculate a late fee on an invoice?

Multiply the overdue amount by the late-fee rate for the period late, then add any flat fee. For example, 1.5% per month on 1,000 that is 60 days late is 30, plus any flat fee.

Is it legal to charge a late fee on an invoice?

Generally yes, if the fee was agreed in advance and is within your state's limits on interest. This is not legal advice, so check your local rules.

What is a reasonable late fee percentage?

Many businesses charge between 1% and 1.5% per month, which is 12% to 18% a year. A flat fee is also common for small invoices.

Does late-fee interest compound?

This calculator uses simple interest, so it does not compound. Only charge compound interest if your contract says so.