How to Calculate a Late Payment Fee
Charging interest on overdue invoices is standard business practice — and having an exact, defensible number makes the conversation with a late-paying client much easier. This invoice late payment fee calculator uses simple daily interest based on your stated annual rate and the number of days overdue.
💡 Quick Summary
Late Fee = Invoice Amount × (Annual Rate ÷ 365) × Days Overdue. This is simple daily interest, the most common method for freelance and small-business invoices.
What Rate Should I Charge?
Common late fee rates range from about 1-1.5% per month (roughly 12-18% annually), though some contracts specify higher rates. Many jurisdictions cap the maximum interest rate that can be charged — check your local usury laws before setting a rate above 18-24% annually.
Best Practices for Late Fees
- State it upfront: your late fee rate should be clearly stated in your contract or on the original invoice, not introduced after the fact.
- Use simple interest: most freelance/small-business invoices use simple daily or monthly interest, not compounding.
- Give a grace period: some freelancers wait 5-10 days past the due date before starting to accrue fees, as a goodwill buffer.
- Follow up before charging: a friendly reminder often resolves late payment faster than an automatic fee.
How This Calculator Works
The calculator converts your annual rate into a daily rate (annual rate ÷ 365), multiplies it by the invoice amount and the number of days overdue, and adds that fee to the original invoice amount for your total amount now due.
Late fee interest rates are subject to state and local law — some jurisdictions cap maximum allowable interest rates on invoices. Confirm your rate is compliant before invoicing a client.