How to Charge Late Payment Interest
Roughly 4 in 10 small-business invoices are paid late. Charging interest — and communicating it clearly — is a standard, professional way to encourage on-time payment.
Interest owed = invoice amount × (annual rate ÷ 365) × days overdue — simple daily interest, the same convention used by most invoicing tools and late-payment regulations.
Setting your interest rate
Check your contract first — many specify a late-fee rate. If yours doesn't, look up your local statutory late-payment interest rate (these vary by country and change periodically), or use a conservative default like 1.5%/month (18%/year).
Communicating it professionally
State the overdue amount, days late, and interest clearly and calmly — avoid an accusatory tone on a first reminder, since payment delays are often administrative rather than deliberate. Escalate tone only after repeated non-response.
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Frequently Asked Questions
Is charging late interest legal everywhere?↓
In most jurisdictions, yes, especially if stated in your contract terms — but statutory rates and rules vary by country, so confirm your local regulations.
Should I always charge the interest I'm owed?↓
That's a business relationship decision, not a legal one — some businesses waive interest for good clients with a one-off late payment while enforcing it for chronic late payers.