How to use the late payment fee calculator
- 1Enter the unpaid invoice amount.
- 2Enter the number of days it is overdue, or switch to dates and pick the due date and the date it was paid (use today if it is still unpaid).
- 3Choose whether your terms state an annual rate or a monthly rate, then enter it.
- 4Add a fixed late fee if your terms include one. Leave it blank if not.
- 5Read the interest owed, the late charges in total and the full amount now due.
How late payment interest is worked out
Most late payment terms charge simple interest: interest on the unpaid amount only, not on interest already added. It builds up each day from the day after the due date until the day the invoice is paid.
This calculator turns the rate into a daily figure on a 365-day year. A monthly rate is first converted to an annual one by multiplying by 12, so 1.5% a month is treated as 18% a year. If your contract uses a different method, such as a 360-day year or compounding each month, follow the contract.
Daily interest = Invoice amount × Annual rate % ÷ 100 ÷ 365 Interest owed = Daily interest × Days overdue Total due = Invoice amount + Interest owed + Fixed late fee
Statutory interest in the UK and EU (examples to verify)
In the UK, the Late Payment of Commercial Debts (Interest) Act 1998 lets a business charge interest on late payments from another business at 8% above the Bank of England base rate, using the reference rate in force on 31 December or 30 June before the debt became overdue. It also allows fixed compensation of £40 for debts under £1,000, £70 for £1,000 to £9,999.99 and £100 for £10,000 or more. To use it, enter 8 plus the reference base rate as the annual rate and the matching amount as the fixed fee.
Across the EU, the Late Payment Directive sets a similar default for business-to-business and public sector debts: at least 8 percentage points above the European Central Bank reference rate, plus a minimum of €40 compensation. Each country writes this into its own law, so details differ.
These figures are examples, not legal advice. Rates and rules change, so check the current reference rate and the official guidance in your country, such as GOV.UK's page on late commercial payments, before charging.
United States and Canada: it depends on the contract and the state
There is no single US federal late fee rule for private business invoices. What you can charge depends on what the customer agreed to and on state law, including usury limits that cap interest rates. Many businesses use terms such as 1% to 1.5% per month, but some states set lower limits or have specific rules for consumer debts. Canadian rules also vary by province, and federal law requires interest to be stated as an annual rate in many cases.
If you are unsure what is enforceable where your customer is based, ask a local accountant or lawyer before adding interest.
Put your late payment terms on every invoice
Interest and fees are far easier to collect when the customer agreed to them in advance. State your payment due date, the interest rate (as an annual percentage), when it starts and any fixed fee on your quotes, contracts and invoices.
A clear line such as "Payment due within 30 days. Overdue balances accrue interest at 12% a year, charged daily" sets expectations, and often gets invoices paid on time without any charge at all.
Worked example
A designer's $2,500 invoice is paid 45 days late. Their terms charge 12% a year and a $40 late fee.
| Invoice amount | $2,500.00 |
| Daily interest | $2,500 × 12% ÷ 365 = $0.82 |
| Interest for 45 days | $36.99 |
| Fixed late fee | $40.00 |
| Late charges in total | $76.99 |
| Total due | $2,576.99 |
The customer owes $2,576.99. At 1.5% a month instead (18% a year), the same 45 days would add $55.48 of interest.