Calculators
Late Payment Interest Calculator
An invoice that is 40 days late at 8% a year has not accrued two months of interest — it has accrued 40 days of it. Enter the amount, the due date and your rate to see what is actually owed, then read on for what you can charge and how to raise it without torching the relationship.
By Arshad Hossain · Published
The short version
- Interest accrues per day elapsed, not per month started.
- You can only charge what your contract or invoice said you would charge.
- State the rate on every invoice from the first one, not the overdue one.
- Interest is usually worth less than the relationship — decide before you send it.
Late payment interest calculator
Enter the due date and the date of payment (or today's date, if it is still unpaid) to see what the invoice has accrued.
How the interest is calculated
Interest runs from the day after payment fell due to the day it is paid. The daily amount is the outstanding balance times the annual rate divided by 365, and the total is that daily figure multiplied by the number of days elapsed.
So 2,500 at 8% a year is 0.548 a day. Forty days late, that is 21.92. It is a small number, and being clear-eyed about how small it is matters: interest is rarely the point. The point is that a stated consequence makes the due date real.
What you are allowed to charge
You can charge what the client agreed to. That means the rate must appear in the contract or on the invoice before the invoice goes overdue — not in the chaser you send afterwards. A rate that appears for the first time on day 45 is a rate the client never accepted.
Several jurisdictions also give a statutory right to interest on late commercial payments even where the contract is silent, sometimes alongside a fixed recovery charge. Whether that applies to you depends on where you and your client are and what you agreed, so check the rule for your jurisdiction rather than assuming the figure here is the maximum.
Putting it on the invoice properly
One sentence in your payment terms is enough: "Payment is due within 30 days. Overdue balances accrue interest at 8% a year, charged daily." That is unambiguous, and it is on every invoice from the first one, so nothing is a surprise.
When you do raise it, invoice the interest as its own line on a separate document rather than silently increasing the original invoice. Altering a sent invoice breaks your numbering and gives the client a reason to dispute the whole thing rather than the part they disagree with.
Whether to charge it at all
Having the right to charge interest and exercising it are separate decisions, and the second one is commercial rather than legal. On a first late payment from a client you want to keep, the stronger move is usually to waive it explicitly — saying you are waiving it is what makes the term credible next time.
On a repeat offender, or a client already heading for collections, charge it. At that point the relationship is not what you are protecting and the interest is part of what you are owed.
Late payment interest: common questions
How much interest can I charge on an overdue invoice?
Whatever your contract or invoice terms state, provided the client saw those terms before the invoice went overdue. Many jurisdictions also grant a statutory rate on late commercial payments when nothing was agreed, sometimes with a fixed recovery fee alongside it.
When does interest start accruing?
From the day after the payment due date, not from the invoice date. If your terms are Net 30 and you issued on the first, interest starts on day 31 and accrues daily until the balance is paid in full.
Can I add a late fee if I did not mention one?
Generally not by contract, because the client never agreed to it. A statutory right may still exist depending on your jurisdiction. Adding an unannounced fee usually invites a dispute over the whole invoice rather than producing faster payment.
Is a percentage per month legal?
Often yes, but some jurisdictions cap the rate and treat anything above it as an unenforceable penalty. A monthly percentage also sounds far larger annually than people intend — 2% a month is 24% a year. State the annual figure too.
Should I charge interest or just chase harder?
Chase first. Most late payments are administrative rather than deliberate, and a clear reminder to the right person resolves them. Keep interest for clients who are unresponsive or repeatedly late, where the term needs to mean something.
Frequently Asked Questions
Does the calculator use 360 or 365 days?
Does it handle compound interest?
How is interest calculated after a partial payment?
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