Free tool
Late payment interest calculator
Enter the overdue amount, the annual interest rate your terms allow, and how many days late the payment is. The calculator shows the simple interest owed and the formula behind it. With JavaScript on, the figures you type stay in your browser.
Updated
Interest on a late invoice
Interest owed
123.29
Per day late 2.74
Amount plus interest 12,623.29
Simple interest, actual/365, rounded to the cent.
Not legal advice. The maximum rate you may charge, and whether you may charge interest at all, depends on your contract and on the law where you and your customer are. Legal maximums vary by US state and by country.
How it is calculated
interest = amount x (annual rate / 100) x days late / 365 per day = amount x (annual rate / 100) / 365
Worked example. An invoice of 12,500 paid 45 days late, at 8% a year: 12,500 x 0.08 x 45 / 365 = 123.29 of interest, or 2.74 for each day late, for 12,623.29 in total.
This is simple interest: it is charged on the overdue amount only, never on interest already added, and it does not compound. If your terms state a monthly rate, multiply it by 12 for the annual rate the formula expects.
Before you add interest to a reminder
- Check your terms. Interest is easiest to collect when the rate was on the contract or the invoice before the work was done.
- Check the law that applies. Caps on interest differ between US states and between countries, and some jurisdictions set their own rate for late commercial payments.
- Show your working. List the original amount, the days late, the rate and the interest as separate lines so the customer can check each one.
- Weigh the relationship. Waiving interest on a first late payment can be worth more than the interest itself.
Need the wording? The past due invoice email templates include an optional line for interest.
Or let the reminders go out for you
Ataski's AR Cash Collector: Chases your overdue invoices and gets you paid — and never emails a customer about a bill they already settled. It matches every payment before it drafts a reminder, scales the tone to how overdue an invoice is, and waits for your approval before anything is sent, by default.
Questions
How is late payment interest calculated?
As simple interest: invoice amount x annual rate x days late / 365. Interest is charged on the overdue amount only, not on earlier interest, and the result is rounded to the cent.
What interest rate can I charge on a late invoice?
The rate your contract or invoice terms set, within the limits of the law that applies to you. Legal maximums vary by US state and by country, and some jurisdictions set their own rate for late commercial payments. This calculator is not legal advice.
My terms say 1.5% per month. What annual rate is that?
For simple interest, multiply the monthly rate by 12: 1.5% a month is 18% a year. Enter 18 as the annual rate.
Should the interest go on the reminder email?
Only if your terms allow it. State the original amount, the days overdue and the interest as separate lines, so the customer can check each figure.