Late Payment Interest Calculator
- Invoice
- Late interest
Each extra day adds $1.64. You can only charge late interest your terms and state law allow.
How the late payment interest calculation works
Convert the yearly rate into a daily rate
Divide by 365. 12% a year on $5,000 is $5,000 × 0.12 ÷ 365 = $1.64 a day.
Multiply by the days past the due date
Count from the due date, not the invoice date. 45 days late is $5,000 × 0.12 × 45 ÷ 365 = $73.97.
Add any flat late fee
Some terms charge a one-time fee instead of, or as well as, interest. Only add it if your agreement allows both.
Only charge what your terms and state law allow
The rate should be stated on the invoice or contract before the work is done. State law may limit the rate or fee, and the rules differ by state, so check yours.
Worked example. A $5,000 invoice paid 45 days late at 12% a year accrues $73.97 in interest, $1.64 a day. With no flat fee, the total now due is $5,073.97.
Late Payment Interest FAQ
How do I calculate late payment interest on an invoice?
Invoice amount × yearly rate × days late ÷ 365. A $5,000 invoice 45 days late at 12% a year is $73.97.
What late payment interest rate should I charge?
There is no standard rate for business invoices. Choose a rate, put it in your payment terms before the work starts, and check that it is within your state's limit. 1% a month is 12% a year and 1.5% a month is 18% a year. At 18%, the $5,000 invoice 45 days late owes $110.96.
Is there a maximum late fee allowed by law?
There is no single national cap. Each state sets its own rules on interest and late fees, and they can differ for consumer and business accounts. Check your state's statutes or ask a local attorney before you set your terms.
Can I charge a late fee and interest?
Only if your contract or invoice terms say so and state law permits it. Customers can dispute charges that weren't agreed in advance.
How do I convert a monthly late fee to a yearly rate?
Multiply the monthly rate by 12. 1.5% a month is 18% a year. Enter the yearly rate above.
When does late interest start?
From the day after the due date in your terms. For Net 30 terms that's 31 days after the invoice date.
What is the Prompt Payment Act interest rate?
Federal agencies that pay a contractor late owe interest at the Treasury rate. It is 4.75% a year for 1 July to 31 December 2026 (Bureau of the Fiscal Service). Agencies use a 360-day year and add unpaid interest to the principal every 30 days, so a $5,000 invoice 45 days late earns about $29.73, a little more than the $29.28 this calculator shows at 4.75%. Use Treasury's own calculator for federal claims.
Sources: Bureau of the Fiscal Service: Prompt Payment interest rate · eCFR: 5 CFR 1315.10, late payment interest penalties