Late payment fee & interest calculator

How late-payment interest works

Late-payment interest turns an annual rate into a daily charge on the unpaid balance. Take the amount owed and multiply by the rate. Divide by 365 to get a daily figure. Then multiply by the number of days overdue. A $1,000 invoice at 8% a year, overdue for 30 days, gives about $6.58 in interest. That is small on one invoice. It adds up across a slow-paying client. It also gives you a plain number for a reminder, in place of an empty threat.

Simple vs compound (and why invoices use simple)

This calculator uses simple interest. The daily rate always applies to the original invoice amount. It does not apply to a balance that grows as interest accrues. Compound interest charges interest on the interest already added. Over a long overdue period, that gives a much bigger number. Invoices almost never compound. A client finds it harder to check, and the contract needs a clear clause for it to hold up. Simple daily interest is the norm. This tool computes it.

What rate can I actually charge?

There is no single right answer. It depends on statute and contract, and both vary by where you and your client are. The UK sets a statutory rate for qualifying business-to-business debts (Bank of England base rate + 8%). This calculator’s 8% default comes from that rate. The US has no federal rate. State law and your own written terms decide it. Many small businesses state a rate on the invoice itself, often 1–1.5% a month. Put your rate in writing before the work starts. Treat the 8% default here as a starting point to check. It is not a legal answer.

Common questions

How much interest can I actually charge on an overdue invoice?

It depends on your contract and where you do business. No single number applies everywhere. In the UK, qualifying business-to-business debts carry a statutory rate: the Bank of England base rate plus 8% a year. This calculator’s 8% default comes from that rate. The US has no federal standard. State law and your own written terms decide what you can charge. Many small businesses use 1–1.5% a month (12–18% a year) and state it on the invoice. This isn’t legal advice. Check which rules apply where you and your client are. Put the rate in writing before work starts.

Is late-payment interest simple or compound?

This calculator uses simple interest. It applies the same daily rate to the original invoice amount for every day it is overdue. It does not compound daily on a growing balance. Simple interest is the norm for invoices. Compound interest on a business invoice needs a clear clause in the contract. Most small-business terms do not have one. A client can also check simple daily interest by hand. That helps when you want to get paid without a fight.

Can I charge a flat late fee instead of interest?

Yes. Many small businesses use a flat, one-off late fee instead of daily interest, or with it. A flat fee is simple to state, and a client understands it easily. This calculator supports both. Fill in the flat fee field and keep your usual interest rate. Or set the rate to 0 and use only the flat fee. Put your choice in the invoice terms before the work starts. A fee added after the fact looks like a penalty. In some places, a late fee that nobody agreed to is not enforceable.