Invoice details

Original invoice amount

Days past due

days

Count from the day after the invoice due date. A Net 30 invoice issued Jan 1 (due Jan 31) is 1 day late on Feb 1.

Late fee policy Most common policies. Always disclose the policy in your contract or invoice terms before charging.

Flat fee amount

Monthly rate

% / mo

1-2% per month is standard and enforceable in most US states. Above 2% per month risks state usury limits.

Total balance due

$2,538

$2,500 invoice + $37.50 late fees

Late fees

$37.50

Effective APR

18%

Days past due

Original invoice

$2,500

How it adds up

Original invoice$2,500

+ Late fee$37.50

Total balance due$2,538

Late fee policies that actually work

You have three common late fee structures and one combo. Each has tradeoffs for collection rate, customer relationship, and legal exposure.

1. Flat one-time fee ($25-$50)

The simplest. Charged once when the invoice goes past due, regardless of how late. Best for small invoices and high-volume work where a percentage doesn’t add up to anything meaningful.

Pros: Easy to communicate, no compounding math, customers don’t feel "punished" for being a few days late.
Cons: No incentive to pay sooner once they’re past due (the fee is the same at 1 day or 100 days).

2. Monthly percent (1-2% per month)

The most common policy in trades and B2B. Charged each month the invoice remains unpaid — usually 1.5% per month, which is 18% APR (the credit card industry standard).

Pros: Compounds pressure to pay, scales with invoice size, legally defensible in nearly all US states.
Cons: Confuses customers who don’t track timing carefully. Above 2% per month risks state usury laws.

3. Daily interest (0.04-0.05% per day)

Same effective rate as monthly percent but charged daily. Same APR (18% = 0.0493% per day). Used when you want a "drip" of pressure every day rather than a monthly bump.

4. Combo (flat fee + monthly percent)

The hammer. $25-$50 flat fee day 1 past due, then 1.5% per month after that. Maximum collection pressure but use carefully — this is what makes the difference between a customer paying late and a customer disputing the entire invoice.

State usury limits

Maximum legal interest rates on commercial debt vary by state. 1.5% per month (18% APR) is safe in all 50 states. Higher rates are legal in some states for B2B but not B2C:

State	Max commercial rate
California	10% APR (consumer); no limit B2B
Florida	18% APR consumer; 25% APR B2B
New York	16% APR (consumer); 25% B2B
Texas	18% APR (most cases)
Most others	18-24% APR is the safe ceiling

This is general guidance, not legal advice — for high-value invoices, ask a lawyer in your state.

Disclose the policy upfront

You can’t charge a late fee that wasn’t disclosed before the work was done. Put the late fee policy in your contract or proposal AND on the original invoice. If the customer disputes it later, you need both.

Standard language: "Past due invoices are subject to a late fee of 1.5% per month (18% APR), accruing from the day after the due date."

The full formulas

flat: late_fee = flat_amount
monthly: late_fee = invoice × rate × (days ÷ 30)
daily: late_fee = invoice × daily_rate × days
combo: late_fee = flat_amount + (invoice × monthly_rate × days ÷ 30)

Want help drafting the late fee letter to the customer? See our late fee letter template.

Calculate the late fee on a past-due invoice.