Calculate Late Payment Fees
Calculate late fees on overdue invoices. Daily, monthly, and total penalties by amount and terms.
Standard Late Payment Terms
The most common late fee structure: 1.5% per month (18% APR) on outstanding balances, applied after a 30-day grace period. Some businesses charge a flat fee ($25-50 per late payment) instead of percentage. Your invoice must clearly state the late fee terms to be enforceable. Most states cap late fees at 1.5-2% per month (18-24% APR).
Enforcing Late Fees
Three keys to collecting late fees: 1) Include clear terms on every invoice ("1.5% monthly late fee on balances over 30 days"). 2) Send payment reminders at 7, 14, and 30 days past due. 3) Follow through consistently — waiving fees trains clients to pay late. Accounts receivable automation tools (QuickBooks, FreshBooks) send reminders and calculate fees automatically.
The average small business has $84,000 in unpaid invoices at any given time. Offering a 2% discount for payment within 10 days (common terms: "2/10 Net 30") costs you 2% but eliminates 30-60 days of cash flow delay. For businesses with tight cash flow, the discount pays for itself through reduced borrowing costs.
