A charge added to an overdue invoice as a penalty for not paying by the due date.
A late fee is an additional charge applied to an invoice when payment is not received by the due date. It serves as both a penalty for late payment and an incentive for clients to pay on time. Late fees are standard business practice and help protect your cash flow.
For contractors and service providers, late fees compensate for the real cost of delayed payments, including disrupted budgeting and time spent chasing overdue invoices.
Late fees are typically structured as a flat dollar amount per overdue period, a percentage of the invoice total (commonly 1% to 2% per month), or daily interest charges on the outstanding balance. The right structure depends on your industry and invoice sizes.
Include your late fee policy in your contract or terms of service before starting work. State the late fee terms clearly on every invoice, including the amount or percentage and when it kicks in. Most businesses apply late fees after a short grace period, such as 5 to 15 days past the due date.
Late fee laws vary by state and country. Some jurisdictions cap the maximum percentage you can charge. Check your local regulations to ensure your late fee policy is enforceable. Having the terms agreed to in writing before work begins strengthens your position.
Invoicer tracks due dates and helps you follow up on late payments automatically.
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