Late Fee

What is a late fee?

A late fee is a penalty charge added to an invoice when a client doesn't pay by the due date. It's designed to encourage on-time payment and compensate you for the hassle and cash flow impact of chasing overdue invoices.

Late fees can be a flat amount (e.g., $25) or a percentage of the invoice total (e.g., 1.5% per month).

How to set late fees

Common approaches include:

• Flat fee — A fixed dollar amount like $15, $25, or $50 regardless of invoice size
• Percentage — A percentage of the unpaid balance, often 1-2% per month
• Daily rate — A small daily charge that accumulates until payment is received
• Tiered — Increasing fees the longer payment is delayed (e.g., $25 at 30 days, $50 at 60 days)

Making late fees enforceable

For late fees to hold up, they need to be disclosed upfront. Include your late fee policy clearly on every invoice and ideally in your contract or service agreement. Something like "A late fee of 1.5% per month will be applied to balances over 30 days past due" makes expectations clear. Without prior disclosure, collecting late fees becomes difficult.

Should you charge late fees?

Late fees work best as a deterrent—most clients will pay on time to avoid them. Whether you actually enforce them depends on the relationship. For chronic late payers or new clients, applying the fee sends a clear message. For long-term clients who occasionally slip, you might waive it as a goodwill gesture. The key is having the policy in place so you have the option.