Late fee calculator. Find out exactly how much your client now owes you.
Calculate flat late fees, monthly compounding interest, or daily simple interest on any overdue invoice. Includes a US-state statutory max-rate helper, a full month-by-month amortization table, and a copyable summary you can paste into a follow-up email.
Month-by-month breakdown
1 period · compound| # | Period | Opening balance | Fee added | Closing balance |
|---|---|---|---|---|
| 1 | Apr 2026 | $1,000.00 | $15.00 | $1,015.00 |
What is a late fee on an invoice?
A short primer on the legal mechanic that turns "I'll pay you next week" into something with consequences, and how to use it without scaring off good clients.
A late fee (also called a late payment penalty, finance charge, or service charge) is an extra amount a seller adds to an unpaid invoice once it crosses its due date. The fee can be a one-time flat amount, a percentage of the invoice, or interest that accrues for every day or month the balance goes unpaid.
Late fees serve two purposes. First, they compensate you for the cash-flow cost of carrying an unpaid receivable. You should be earning interest on that money, not your delinquent client. Second, they create a financial incentive for the client's accounts-payable team to prioritize your invoice over the dozens of others sitting in their queue.
The catch: a late fee is only enforceable if the client agreed to it in advance. That means it needs to appear in your signed contract, your terms of service, or, at minimum, on the original invoice itself, in language clear enough that a court would consider the client to have accepted it. Surprise fees added after the fact are almost always uncollectable.
Late fee vs. finance charge vs. interest
People use these terms interchangeably, but there's a useful distinction. A flat late fee is a one-time penalty that hits the moment an invoice goes past due (e.g. "$25 added if not paid by the due date"). A finance charge or interest accrues continuously over time (typically 1 to 2% per month, or a daily APR) and grows the longer the invoice stays unpaid. Many businesses combine the two: a flat $25 fee at day 1, plus 1.5% per month thereafter.
Flat late fee
One-time charge added when the invoice goes past due. Usually $25 to $50 or 5 to 10% of the invoice. Simple to communicate, easy to collect.
Monthly interest
Recurring percentage of the outstanding balance, charged each month past due. Industry-standard rate is 1.5% per month (18% APR). Compounds, so the later they pay, the more they owe.
Daily interest
Annual rate divided by 365 (or 360), accrued every day. Common for B2B contracts with longer payment terms. Most precise; matches how banks compute commercial loan interest.
Grace period
A buffer of 3 to 10 days after the due date during which no fees accrue. Reduces friction with otherwise-good clients who occasionally run a few days late.
How to calculate a late fee, three ways
The math under the hood of the calculator above. Pick the method that matches your contract, or choose your method based on how aggressive you want the fee to feel.
Flat late fee
Adds a fixed dollar amount or percentage to the invoice once it crosses the due date. The cleanest method to put on a freelance contract.
$1,000 invoice + $50 flat fee
= $1,050.00 total owed
Monthly compounding
Each month past due, multiply the outstanding balance by the rate, add it to the balance, repeat. Rewards prompt payment, punishes long delays.
$1,000 × (1.015)³ at 1.5%/mo
= $1,045.68 after 3 months
Daily simple interest
Take the annual rate, divide by 365, multiply by the days late. The standard for commercial contracts and what banks use on commercial paper.
$1,000 × (18% / 365) × 90 days
= $1,044.38 total owed
Are late fees legal? The short answer: yes, with caveats.
In every US state and most international jurisdictions, late fees on B2B invoices are legal, provided you follow two rules.
Rule 1 · The client must have agreed in advance
A late fee is enforceable only if the client knew about it before they were late. That agreement can come from any of these places:
- A signed contract or statement of work with a "Late Payments" clause spelling out the rate, the trigger, and any grace period.
- Your standard terms of service the client accepted when becoming a customer (online checkbox, click-to-accept, signed master agreement).
- Language printed on the original invoice is surprisingly enforceable in most jurisdictions for ongoing B2B relationships, especially after the second or third invoice carries the same terms.
- Industry-standard custom for trade-specific work. Courts will sometimes uphold fees that match what's normal in your industry, even without explicit agreement.
Rule 2 · The rate must be "reasonable"
Even with a signed agreement, courts can throw out fees they consider punitive rather than compensatory. The general guidelines:
- Under 1.5% per month (18% APR) is universally considered safe and reasonable for B2B work.
- 1.5 to 2% per month (18 to 24% APR) is the upper end of common practice. Defensible, but verify your state's statutory cap before going this high.
- Above 2% per month is risky. Most US states cap unsecured commercial interest somewhere between 6% and 24% APR, and exceeding the cap can render the entire fee unenforceable.
- Flat fees are evaluated against the invoice value. A $50 fee on a $200 invoice may look punitive; the same $50 on a $5,000 invoice is clearly compensatory.
Statutory maximum interest by US state
For unsecured commercial debt · 2026Rates shown are general statutory maximums for unsecured commercial debt. Some states have separate caps for different debt types or written-contract carve-outs. Always confirm with a local attorney for amounts over typical industry norms, and remember nothing on this page is legal advice.
What's a reasonable late fee to charge?
Benchmark data from 12,000+ Simple Invoice users plus published industry surveys. Use these as a starting point, not a ceiling.
| Industry | Typical flat fee | Typical monthly rate | Avg. grace period |
|---|---|---|---|
| Freelance design & creative | $25 to $50 | 1.5% / mo | 5 days |
| Web & software development | $50 to $100 | 1.5% / mo | 5 days |
| Marketing agencies | $50 | 2.0% / mo | 7 days |
| Legal & consulting | None typical | 1.0 to 1.5% / mo | 10 days |
| Construction & trades | $50 | 1.5% / mo | 0 to 3 days |
| Photography & events | $25 | 2.0% / mo | 5 days |
| Bookkeeping & accounting | $35 | 1.5% / mo | 10 days |
| B2B SaaS & subscriptions | None typical | 1.0% / mo | 3 days |
How to actually collect the late fee
Calculating the fee is the easy part. Getting it paid is where most freelancers and small studios fold. A repeatable five-step playbook.
Put it in writing, twice
The late-payment clause should appear in the signed contract and on every invoice you send. Belt and suspenders. Repetition is what makes it stick legally and psychologically.
Send the first reminder before the due date
Three to five days before due is the sweet spot. "Friendly heads-up. Invoice INV-0042 is due Friday." Most late payments are unintentional, and a soft reminder solves them without ever triggering a fee.
On day 1 past due, issue the updated invoice
Don't wait. Re-send the invoice with the late fee added, the new total bolded, and a brief, neutral explanation : "As per our agreement, a 1.5% monthly fee has been applied. Updated total: $1,015."
Escalate at week 2, 4, and 8
Each escalation should be firmer in tone but professional . Week 2: a direct ask. Week 4: copy the client's manager or AP head. Week 8: written notice that you're pausing work or referring to collections.
Offer to waive the fee for prompt payment
A pragmatic move that preserves the relationship and gets you the principal . "Pay the original $1,000 by Friday and we'll waive the $15 in fees." Works surprisingly often, especially with clients you want to keep.
Last resort: small claims, factoring, or a collections agency
For unpaid invoices over $1,000, small-claims court is cheaper and faster than people expect ($30 to $100 filing, no lawyer needed). For larger sums, an invoice-factoring company or commercial collections agency can buy the debt at 70 to 85¢ on the dollar.
Drop-in late-payment clause for your contract
Battle-tested language you can paste straight into your engagement letter, MSA, or terms of service. Edit the rate to match what you set on the invoice.
14. Late Payments. All invoices issued under this Agreement are payable within thirty (30) days of the invoice date ("Due Date") unless otherwise specified on the invoice. Any amount not received by the Due Date will be considered overdue.
Following a grace period of five (5) calendar days after the Due Date, overdue balances shall accrue a late payment fee equal to one and one-half percent (1.5%) per month, or the maximum rate permitted by applicable law, whichever is less. Interest shall be calculated on the unpaid balance and compounded monthly until paid in full.
Client agrees to reimburse Provider for all reasonable costs of collection, including attorneys' fees and court costs, incurred in collecting any overdue amount. Provider reserves the right to suspend ongoing services or withhold final deliverables until all outstanding balances are paid in full.
Sample language only, not legal advice. Have a lawyer review before using in jurisdictions with statutory caps below 1.5%/mo.
Common questions about late fees
The questions we get asked most often by freelancers and small businesses figuring this out for the first time.
Is this calculator legally accurate for my state?
The math is precise. Same formulas courts use to calculate prejudgment interest. The state-rate helper reflects general statutory maximums for unsecured commercial debt as of 2026, but state laws change and have carve-outs (different rates for written contracts, for judgments, for specific industries). Confirm with a local attorney before relying on the cap for an enforcement action.
Nothing on this page constitutes legal advice. It's a tool for ballpark calculations and contract drafting.
Can I add a late fee retroactively if it wasn't on the contract?
Generally, no, at least not enforceably. Courts require the client to have agreed to the fee before they were late. Your best play in that situation is to add the language to the next invoice ("Effective immediately, late payments will accrue 1.5%/mo") and apply it from then on. For the existing overdue invoice, focus on collecting the principal and treat the missed fee as a lesson learned.
What's the difference between simple and compound interest?
Simple interest charges the rate against the original invoice amount only. $1,000 × 1.5% = $15 every month, no matter how many months pass. Compound interest charges the rate against the running balance, so the second month you're paying interest on the original invoice plus last month's interest. The difference is small at first but grows fast over six months or more.
Most B2B contracts specify simple monthly interest because it's easier to communicate. The calculator defaults to compound but lets you switch.
Should freelancers actually charge late fees, or is it bad for the relationship?
Survey data from our user base says yes, with nuance. Freelancers who explicitly state late fees on every invoice get paid 30 to 40% faster than those who don't, even when they rarely actually charge the fee. The fee's real purpose is psychological: it moves your invoice up the AP queue. Many seasoned freelancers maintain the policy on paper, then waive it on a case-by-case basis for clients they value, getting both the prompt payment and the goodwill.
What happens if my state's statutory rate is lower than the rate I put in my contract?
It depends on the state. Some void the entire fee provision (worst outcome, you collect nothing). Some "blue-pencil" the rate down to the legal max and enforce that. The safe move is to write your contract clause with the words "or the maximum rate permitted by applicable law, whichever is less", exactly like the sample clause above. That phrasing automatically falls back to the legal max instead of getting tossed.
Can I charge a late fee on a late fee?
Compound interest does this implicitly. Last month's accrued interest gets added to the balance, and next month's rate applies to that combined amount. Charging a second flat fee on top of accrued interest is unusual and can look punitive. The cleanest model: one flat fee at day 1 past due, then monthly compounding interest thereafter. Don't stack additional flat fees mid-cycle.
Do these rules apply internationally?
The principles do; the specific rates don't. The EU's Late Payment Directive sets a statutory minimum of 8 percentage points above the European Central Bank reference rate for B2B invoices, applicable even without contract language. The UK has its own equivalent under the Late Payment of Commercial Debts Act. Australia, Canada, and most of Asia rely on contract terms with caps set by usury or interest-rate laws. Use the calculator's "International / skip" option and check your local jurisdiction.
Can the full Simple Invoice app apply these fees automatically?
Yes. Set your default late-fee policy once in account settings (flat, monthly, or daily) and every overdue invoice automatically issues a follow-up with the updated balance, the right math, and the right contract language. Pair it with auto-reminders and you'll never have to manually chase or recalculate again.
Stop calculating late fees by hand. Send invoices that handle themselves.
Simple Invoice applies the late-fee policy you set automatically: calculating interest, sending reminders, and updating the running total so you never have to chase or do the math. 3-day free trial, cancel any time.