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Late payment interest calculator
A customer paid late. Work out the interest and any late fee your terms allow, by the day, with a grace period if you give one. Runs in your browser; nothing is saved.
The overdue invoice
How is it worked out?
Interest starts this many days after the due date.
Only if your terms say so, and where the law allows it.
What is owed
Days late
60
Annual rate
1.5% a month × 12
18%
Interest per day
Amount × annual rate ÷ 365
$2.37
Late interest
$142.03
Total to collect
$4,942.03
You can only charge interest or a fee that your customer agreed to in advance, in your terms or on the invoice. Limits differ by state and province. In Canada, a contract that states a rate per month must also state the equivalent yearly rate, or the Interest Act caps the interest at 5% a year. Works in any currency. General information, not legal advice.
How late payment interest is calculated
- Days late = date paid − due date.
- Days charged = days late − grace period (never below zero).
- Annual rate = the monthly rate × 12, if your terms state a monthly rate.
- Simple interest = amount × annual rate × days charged ÷ 365.
- Compounded monthly: for each full month, the month's interest is added to the balance; the remaining days are then charged simply on the new balance.
- Total to collect = amount + interest + any flat late fee in your terms.
Worked example
A $4,800 invoice was due on September 15 and paid on November 14: 60 days late. The terms say 1.5% a month (18% a year). Simple interest is $4,800 × 18% × 60 ÷ 365 = $142.03, about $2.37 a day. Compounded monthly it is $143.08. With a 10-day grace period, 50 days are charged and the simple interest is $118.36.
Write late payment terms that hold up
- Put them in writing before the sale: on the quote or estimate, in your contract or terms of business, and on every invoice.
- State the rate per year, even if you also state it per month. In Canada this is required by the Interest Act for the full rate to be recoverable.
- Say when it starts (from the due date, or after a grace period) and whether it compounds.
- Check the limits that apply. US states and Canadian provinces set their own rules on interest and fees, with tighter limits for consumers. Canada's Criminal Code also sets a maximum criminal rate of interest. When in doubt, ask a lawyer or your accountant.
- Use a clear due date. "Net 30" is clear; "payable soon" is not. The invoice due date calculator works it out for any terms.
Charging interest is the last step, not the first. Reminders before and after the due date, a statement each month and a phone call do more to get invoices paid. Our guide on how to collect overdue invoices walks through it, and the DSO calculator shows how long, on average, customers take.
Sources
- Interest Act (R.S.C. 1985, c. I-15), section 4: yearly rate to be stated
- Criminal Code, section 347: criminal interest rate
As of October 25, 2026. US limits on interest and late fees are set state by state; check your state's laws or attorney general for the rules that apply to you.
Questions
How do I calculate interest on a late invoice?
Multiply the overdue amount by the annual rate and by the days late divided by 365. At 1.5% a month (18% a year), a $4,800 invoice paid 60 days late carries $4,800 × 18% × 60 ÷ 365 = $142.03 of interest. If your terms say the interest compounds monthly, each month's interest is added to the balance before the next month is charged.
What late fee can I charge?
Only what the customer agreed to before the work was done or the goods were delivered, usually in your terms and conditions, quote, contract or on the invoice. The maximum depends on where you and the customer are: US states and Canadian provinces have their own rules on interest and fees, and consumer sales are more tightly limited than business-to-business ones. Many businesses use 1% to 1.5% a month; check the law that applies to you before you choose.
Can I add late fees to an invoice that did not mention them?
Generally not. Interest or a fee that was never part of the agreement is hard to collect and can damage the relationship. Put your late payment terms on every quote and invoice from now on, and apply them to invoices issued under those terms.
Do I have to show an annual rate in Canada?
Yes, if you state the interest as a rate per day, week or month. Under section 4 of the federal Interest Act, when a written contract sets interest at a rate for a period of less than a year and does not also state the equivalent yearly rate, no more than 5% a year can be recovered. So a term of "1.5% per month (18% per year)" is safer than "1.5% per month" alone. Mortgages on real property are excluded from that section.
What is a grace period?
A number of days after the due date before interest starts. With a 10-day grace period, an invoice paid 60 days late is charged for 50 days. It gives customers who pay a little late time to do so without a charge.
Should I charge interest or a flat late fee?
Interest grows with the amount and the time, so it is fair on both small and large invoices. A flat fee is simpler to explain and covers the cost of chasing a small invoice. Some businesses use both, where the law allows it. Either way, the main point is to be paid on time, so reminders and a clear due date matter more than the charge.
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- Try AcboBooks free for 15 days
General information, not legal advice. Laws on interest and late fees differ by state and province and change; confirm the rules that apply to you.
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