How to charge late fees on an invoice
How to charge late fees: set a policy, disclose it up front, calculate the fee, and apply it to overdue invoices. Step-by-step, with a free calculator.
Tillage Team
To charge a late fee, set a clear policy (a flat fee or monthly interest, often 1–1.5% per month), disclose it on the invoice and in your contract before the work, then apply it to the overdue balance once the due date passes and the legal limit allows.
Steps
- Decide on a late-fee policy. Choose a flat fee (e.g. $25) or monthly interest (commonly 1–1.5% per month). Keep it within your state or country’s maximum allowable rate.
- Disclose it before the work. Put the late-fee terms on every invoice and in your contract or engagement letter. A fee you didn’t disclose in advance is hard to enforce.
- Wait for the due date to pass. Late fees only apply once the invoice is genuinely overdue. Send a reminder on or just after the due date before adding any fee.
- Calculate the fee. For monthly interest, multiply the overdue amount by your monthly rate and by the months overdue. Use the late fee calculator to get the exact figure.
- Apply it and re-invoice. Add the late fee as a line item, send the updated total, and keep sending reminders until the balance — including the fee — is paid.
How much can you charge?
A common late fee is 1% to 1.5% per month (about 12–18% annually), or a flat fee of $25–$50. The ceiling is your local usury limit, which caps the maximum interest you can legally charge — check your state or country’s rules before setting a rate.
Make late fees enforceable
Enforceability comes down to disclosure. State the late-fee policy in writing on the invoice and in the contract the client agreed to, before the work starts. Then apply it consistently. Automating reminders before and after the due date usually recovers most overdue invoices without ever needing the fee.
Frequently asked questions
Is it legal to charge a late fee on an invoice?
Yes, in most places, as long as the fee is disclosed in advance and stays within your local maximum interest rate. The key requirement is that the client agreed to the terms — on the invoice or in a contract — before the work.
What is a reasonable late fee?
A reasonable late fee is typically 1–1.5% of the overdue amount per month, or a modest flat fee of $25–$50. It should compensate you for the delay without exceeding what your local law allows.
How do I calculate a late fee?
For monthly interest, multiply the overdue amount by your monthly rate, then by the number of months overdue. A $2,000 invoice at 1.5% per month that’s 30 days late incurs a $30 fee. The late fee calculator does this for you.
