Invoice late fee calculator

How a late fee on an invoice is worked out

Three things decide the fee: when the invoice was due, how many days late it is on the day you check, and what the agreement says about the charge. The due date is the invoice date plus the payment terms; Net 30 gives thirty days. The days late are the days between the due date and the date of calculation, with no fee while the result is zero or negative. The fee is then a one-time amount, a percentage of the invoice for each month late, or a yearly rate pro rated by day. You can combine a percentage with a one-time fee and set a maximum, as many agreements do.

The formulas

Flat fee: the stated amount, once, as soon as the invoice is past due (and past any grace days). Simple monthly: amount × monthly rate × days late ÷ 30. Compound monthly: amount × ((1 + monthly rate) ^ (days late ÷ 30) − 1). Annual rate: amount × yearly rate × days late ÷ 365. In all cases the invoice amount is the base, and a maximum fee, if you set one, is applied per invoice at the end. A month is treated as 30 days; billing systems that charge a full month for part of a month will show higher fees than this pro rata method.

Worked example

An invoice for $1,000.00 is dated January 1, 2026 with Net 30 terms, so it is due on January 31, 2026. Checked on March 17, 2026 it is 45 days past due and falls in the 31–60 day group. At 1.5% a month the simple fee is $1,000.00 × 1.5% × 45 ÷ 30 = $22.50, so the total due is $1,022.50. The compound method gives $22.58, an 18% yearly rate gives $22.19 and a flat $25.00 fee gives $25.00. The rates and amounts here are examples to show the arithmetic; yours come from your own agreement.

Limits and common mistakes

Charging a fee that was not agreed in writing is the most common mistake; the second is copying a rate from a template without checking what the law in your state allows. State rules on maximum interest and on fees differ, and this calculator deliberately does not include a table of them, because a limit read off a website can be out of date. The Prompt Payment Act, which does fix a mechanism for interest, covers federal agencies only.

Other limits: the calculator counts calendar days and does not skip weekends or holidays; it does not apply partial payments (enter the unpaid balance as the invoice amount); and it does not stop the fee at a legal maximum unless you enter one.

Can I charge a late fee on an invoice?

Usually only if you and your customer agreed to it before the work, in a contract, on the signed quote or in the written payment terms on the invoice. A fee that nobody has seen in advance is hard to collect and can sour the relationship. We did not find a federal statute that sets a general limit on late fees between private businesses, and the federal Prompt Payment Act applies only to payments owed by federal agencies, but state laws on interest and fees do exist and their limits differ, so this calculator does not embed any state caps. Check your state's rules or ask a lawyer before adding a clause.

What does Net 30 mean and when is the invoice due?

Net 30 means the full amount is due 30 days after the invoice date. An invoice dated January 1, 2026 with Net 30 terms is due on January 31, 2026; the same invoice on Net 60 is due on March 2, 2026. The calculator counts calendar days, including weekends. Some contracts use end-of-month terms or count from receipt of the goods instead; these are not covered here, so enter the actual due date by adjusting the invoice date.

How is a late fee of 1.5% per month calculated?

As a simple monthly percentage the fee is amount × 1.5% × days late ÷ 30. For $1,000.00 that is $22.50 after 45 days. Yearly this is 18.00% in simple terms, or 19.56% if it were compounded monthly. 1.5% is only an example here: use the rate in your agreement.

What is the difference between simple and compound late fees?

A simple fee is always computed on the original invoice amount. A compound fee is computed on the amount plus the fees already added, so it grows a little faster the longer the invoice stays unpaid. For $1,000.00 at 1.5% a month and 45 days late the simple fee is $22.50 and the compound fee $22.58; a rate of 18% per year, simple, gives $22.19. A flat fee of $25.00 does not grow at all. Many agreements state only a monthly rate; if yours says nothing about compounding, assume simple.

What is a grace period?

A grace period is a number of days after the due date during which no fee is charged. This calculator takes it as a threshold: if the invoice is paid within the grace period no fee is due, but once it is passed the fee runs from the day after the due date. With ten days of grace the example invoice, 45 days late, still owes the full fee of $22.50; had it been paid 8 days late it would owe nothing. Some businesses prefer to start the fee only after the grace period; in that case reduce the days by the grace days yourself.

What do the aging buckets 1–30, 31–60, 61–90 and over 90 days mean?

Accounts-receivable aging sorts unpaid invoices by how long they are past due, so you can see where the money is stuck. Accountants usually use groups of about 30 days: current (not yet due), 1-30 days past due, 31-60, 61-90 and over 90. The older the group, the less likely the money is to be collected, which is why companies set aside a larger allowance for doubtful accounts against old balances. The boundaries are a convention, not a rule, and some businesses count from the invoice date rather than the due date; this calculator counts from the due date.

Does the federal government pay interest when it pays late?

Yes, for contracts covered by the Prompt Payment Act (31 U.S.C. 3902): a federal agency that has not paid a business for delivered goods or services by the required payment date owes an interest penalty for the days after that date, even if the business did not ask for it. The rate is set by the Treasury and published every six months in the Federal Register. It does not apply to payments between private businesses, which follow their contract and state law.

Sources, checked October 28, 2026: 31 U.S.C. §3902 (Prompt Payment Act: interest penalty owed by federal agencies, rate set by the Treasury and published in the Federal Register every six months); AccountingCoach, What is the aging method? (buckets by days past due; the boundaries differ between authors). We did not find a federal law that caps late fees between private businesses; state rules differ and are not included. Related: simple interest calculator, compound interest calculator, APR calculator, date calculator and freelance rate calculator.

Estimates for planning only — not legal, tax or financial advice. Your contract and your state's law decide. How we check our calculators.