Calculate late fees and interest on overdue invoices. Choose a flat fee, one-time percentage, or monthly interest rate — then see the total cost of delayed payment including the effective annual rate.
Late fee owed
$75.00
on a $5,000 invoice
After 90 days: $225.00 in fees
That's 4.5% of the invoice value
Add late fees to your invoices automatically
HourBill tracks time, sends invoices, and calculates late fees — built for freelancers.
Join the HourBill waitlistThere are three common ways to charge late fees on invoices, and the right choice depends on your business type and invoice size.
Monthly interest is the industry standard for B2B invoices. You charge a percentage of the outstanding balance for each month (or partial month) the payment is overdue. The most common rate is 1.5% per month, which equals 18% APR. On a $5,000 invoice that's 60 days late, that's $150 in interest.
Flat fees work well for smaller invoices or subscription-style billing. A $25 or $50 late fee is simple to understand and apply. The downside is that it doesn't scale — a $50 flat fee on a $500 invoice is 10%, but on a $50,000 invoice it's only 0.1%.
One-time percentages (2-5% of the invoice) are a middle ground. They scale with invoice size but don't accumulate over time, making them less effective at motivating prompt payment on very late invoices.
Whichever method you choose, include the late fee terms on your contract before you start work, and print them on every invoice. A late fee that wasn't agreed to in advance is much harder to enforce.
Late fee norms vary by industry. Click any business type below for a calculator pre-filled with typical defaults and actionable tips.
| Business Type | Typical Invoice | Low | Typical Fee | High |
|---|---|---|---|---|
| Freelancers | $5,000 | $25 flat or 1%/mo | 1.5%/mo | 2%/mo or 18% APR |
| Contractors | $15,000 | 1%/mo | 1.5%/mo | 2%/mo + lien rights |
| Consultants | $10,000 | 1%/mo | 1.5%/mo | 2%/mo or $100 flat |
| Small Businesses | $2,500 | $10-25 flat | 1.5%/mo | 2%/mo + collections |
| Creative Agencies | $25,000 | 1%/mo | 1.5%/mo | 2%/mo + kill fee |
| SaaS & Subscriptions | $500 | $10-15 flat | $25 flat | $50 flat + suspension |
Most businesses charge 1-1.5% per month (12-18% APR) or a flat fee of $25-50. The maximum you can charge depends on your state — most states cap late fees at 18-25% APR under usury laws. Your late fee must be stated in the contract or on the invoice before the work begins to be enforceable. Courts may void "penalty" fees that are unreasonably high relative to the actual damages.
The most common late fee for B2B invoices is 1.5% per month on the outstanding balance, applied after a 30-day payment term. This equals 18% APR. Some businesses use a flat fee ($25-$50) for smaller invoices or a one-time percentage (2-5%) for simplicity. The standard varies by industry — construction often uses 1.5%/month, SaaS typically uses flat fees, and agencies use 1-2%/month.
1.5% per month (18% APR) is legal in most US states for commercial B2B transactions. However, some states have lower caps: New York limits commercial interest to 16% APR, while other states may allow up to 25%. The fee must be disclosed in your contract before work begins, and it must reflect a reasonable estimate of damages — not a penalty. Consumer transactions have stricter rules. When in doubt, consult your state's usury laws or a business attorney.