Work out what an overdue invoice now owes — a flat fee, or interest accrued daily, monthly or annually — and the total to put on a follow-up demand.
2,500 × 1.5%/mo × 45/30 months = 56.25Monthly rates divide by 30 per day, so a 45-day delay is one and a half months. That is why a 1.5% monthly rate produces 2.25% over six weeks.
Statutory and contractual caps apply in many jurisdictions — the EU late payment directive, for example, sets limits on what can be charged. Check what your contract and local law permit before issuing a demand.
A late fee only holds up if it was agreed before the invoice was issued. The right place for it is the payment terms on the invoice itself — "Net 30, 1.5% per month on overdue balances" — not a surprise added after the fact. The follow-up then simply applies the term you already stated.
Interest is normally expressed either monthly or annually, and the difference matters. A 1.5% monthly rate is 18% a year; a 12% annual rate is 1% a month. The calculator converts the elapsed days proportionally, so a 45-day delay on a monthly rate is one and a half months, not two.
There are two ways to charge, and they are not exclusive. A fixed late fee is easy to apply and easy to justify as administrative cost. Interest on the outstanding balance compensates for the cost of the delay and scales with how long your money is held. Many contracts use a modest flat fee plus interest.
Before sending a demand, check the ceiling. The EU late payment directive caps what businesses can charge each other, several US states limit consumer late fees, and some jurisdictions treat high rates as a penalty that cannot be enforced. A fee clause that exceeds the local limit can be struck down entirely.
For a monthly rate, multiply the invoice amount by the rate and by days overdue divided by 30. A 2,500 invoice at 1.5% per month, 45 days late, accrues 2,500 × 1.5% × 1.5 = 56.25.
Usually only where statute allows it — the EU late payment directive and several US states provide default interest on commercial debts even without a clause. Where no statute applies, a fee introduced after the fact is often unenforceable.
Common commercial terms run from 1% to 2% per month, which is 12% to 24% a year. Anything significantly above the statutory reference rate risks being treated as an unenforceable penalty.
Interest charged for late payment is generally outside the scope of VAT or treated differently from the original supply, but the treatment varies by country. Ask your accountant before adding tax to the fee line.