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, multiply by the rate, divide by 365 to get a daily figure, then multiply by how many days it’s been overdue. A $1,000 invoice at 8% a year overdue for 30 days works out to about $6.58 in interest — small on any one invoice, but it adds up across a slow-paying client, and it gives you a plain number to put in a reminder instead 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, not to a balance that grows as interest accrues. Compound interest would charge interest on the interest already added, which turns into a much bigger number over a long overdue period. Invoices almost never compound: it’s harder for a client to check, and it needs to be spelled out explicitly in the contract to hold up. Simple daily interest is the norm, and it’s what this tool computes.

What rate can I actually charge?

There’s no single right answer — it comes down to 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%), which is where this calculator’s 8% default comes from. The US has no federal rate; it’s governed by state law and whatever your own written terms say, and many small businesses simply state a rate — often 1–1.5% a month — on the invoice itself. Whatever you land on, put it in writing before the work starts, and treat the 8% default here as a starting point to check, 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 — there’s no universal number. In the UK, the statutory rate for qualifying business-to-business debts is the Bank of England base rate plus 8% a year, which is where this calculator’s 8% default comes from. In the US, there’s no federal standard: state law and your own written terms govern what you can charge, and many small businesses land on 1–1.5% a month (12–18% a year) stated up front on the invoice. This isn’t legal advice — check what applies where you and your client are, and put whatever rate you land on in writing before work starts.

Is late-payment interest simple or compound?

This calculator uses simple interest — the same daily rate applied to the original invoice amount for every day it’s overdue, rather than compounding daily on a growing balance. That’s the invoicing norm: compounding interest on a business invoice would need to be spelled out explicitly in the contract to be enforceable, and most small-business terms don’t do that. Simple daily interest is also easy for a client to check by hand, which matters when the whole point is getting paid without a fight.

Can I charge a flat late fee instead of interest?

Yes — plenty of small businesses use a flat, one-off late fee instead of, or alongside, daily interest, because it’s simpler to state and easier for a client to understand. This calculator supports both: fill in the flat fee field and leave interest at your usual rate, or set the rate to 0 and use only the flat fee. Whichever you choose, put it in your invoice terms before the work starts — a fee sprung on someone after the fact reads as a penalty, and in some places a late fee that was never agreed to isn’t enforceable.