Did you know that adding late fees on invoices is crucial to getting paid on time?
Unfortunately, many self-employed individuals and companies forget to add late fees on their invoices, resulting in late and even missed client payments.
Here's a simple guide on how to calculate late fees:
1. Determine the Terms. First, review your payment terms with your clients, which is usually the number of days after the invoice date that payment is due (e.g., 30 days).
2. Set the Late Payment Fee. Then, decide on the late fee percentage or flat rate to be charged for overdue invoices. Late fees usually range from 1% to 2% of the outstanding amount per month.
3. Identify the Invoice Due Date. Calculate the due date of the invoice by adding the agreed-upon payment terms to the issuance date. For example, if the terms are 30 days, add 30 days to the invoice date.
4. Decide on the Overdue Period. Track the number of days that have passed since the invoice due date. It will help calculate the late fee.
5. Calculate the Late Fee. Once the overdue period is identified, apply the late fee percentage or flat rate to the outstanding amount to calculate the late fee.
6. Add a Late Fee to the Invoice. Double-check that the late fee is clearly outlined on the invoice. Also, add a breakdown showing the original amount, the late fee amount, and the total amount now owed.
Need more help? Download our free professional invoice templates to simplify late fee calculations!
