When a client pays late, you may be entitled to charge interest, either because your contract says so or because the law where you work sets a rate for business debts. This calculator works out simple daily interest on an overdue invoice so you can put an exact figure on a reminder.
How it works
Multiply the invoice amount by the annual rate and divide by 365 to get the interest for one day. Multiply by the number of days the invoice is overdue.
This is simple interest: it is charged on the original amount only, not on interest already added. That is how most late payment terms and statutory schemes work.
Count days from the day after the payment was due. A fixed late fee, if your terms include one, is added on top.
A worked example
A $5,000 invoice that is 45 days overdue, at 8% a year, builds up about $1.10 of interest per day. After 45 days that is $49.32, making $5,049.32 due in total.
Questions people ask
Am I allowed to charge interest on a late invoice?
It depends on your contract and where you and your client are based. Some countries give businesses a legal right to interest on late payments, and a contract can also set a rate. Check your terms and local rules before charging it.
What rate should I use?
Use the rate in your contract or payment terms. If you rely on a statutory scheme, look up the current rate from an official source, because some are tied to a central bank rate that changes over time.
How do I avoid late payments in the first place?
Put the payment terms and any late payment interest on every invoice, take a deposit for larger projects, send a reminder a few days before the due date, and make paying easy by listing all the payment details clearly.