Late Payment Interest Calculator
Work out the interest on an overdue invoice at the rate in your contract: days late, interest a day, the total and what is now due.
Use the rate in your contract or invoice terms. Some countries set a legal late-payment rate, a cap or a fixed compensation amount, and these differ, so check your contract and local law.
Part payments already made (optional)
After each part payment, interest runs only on what is still owed. "Date paid" above is when the rest is paid.
More invoices from the same customer (optional)
Uses the same rate, days in a year, grace period and fees. Leave "paid" blank to use the date paid above.
Interest stretch by stretch
How your late payment interest is worked out
Interest runs for every day the money is late, at the rate in your contract.
- 1
Days late
due → paid
= 30 days - 2
Interest a day
10,000 × 0.08
÷ 365
= 2.19 - 3
Interest so far
10,000 × 0.08
× 30 ÷ 365
= 65.75 - 4
Total now due
10,000
+ 65.75
= 10,065.75
Read more: the formula, a worked example, day counts and what to check
Late payment interest is extra money charged when an invoice is paid after its due date. It is usually simple interest on the unpaid amount, for each day it is late, at a rate set out in the contract or invoice terms. Many businesses also add a fixed late fee. For other interest sums, see the simple interest calculator.
The formula
days late = date paid − due date
interest a day = invoice amount × yearly rate ÷ 100 ÷ 365 (or 360)
interest = invoice amount × yearly rate ÷ 100 × days late ÷ 365
total now due = invoice amount + interest + late fees − part payments
a rate a month × 12 = the yearly rate
compounding monthly: balance × (1 + monthly rate ÷ 100) for each whole month
With a grace period, interest normally starts when the grace period ends; nothing is charged if the invoice is paid within it. With part payments, each stretch between payments earns interest on the amount still owed during that stretch, and the stretches are added up.
Worked example
An invoice of 10,000 at 8% a year was due 30 days ago and is paid today. Days late = 30. Interest a day = 10,000 × 0.08 ÷ 365 = 2.19 (2.1918 before rounding). Interest = 10,000 × 0.08 × 30 ÷ 365 = 24,000 ÷ 365 = 65.75. Total now due = 10,000 + 65.75 = 10,065.75. With a 360-day year, the interest would be 10,000 × 0.08 × 30 ÷ 360 = 66.67.
More examples
| Situation | Working | Interest |
|---|---|---|
| 10 days grace, charged from its end | 10,000 × 0.08 × 20 ÷ 365 | 43.84 |
| 1.5% a month, 30 days, 365-day year | 10,000 × 0.18 × 30 ÷ 365 | 147.95 |
| 1.5% a month, 30 days, 360-day year | 10,000 × 0.18 × 30 ÷ 360 | 150.00 |
| 4,000 paid after 30 of 60 days at 10% | 10,000 × 0.1 × 30 ÷ 365 + 6,000 × 0.1 × 30 ÷ 365 | 131.51 |
| 12% a year compounding monthly, 3 months and 10 days | 10,000 × 1.01³ = 10,303.01, + 10,303.01 × 0.12 × 10 ÷ 365 | 336.88 |
| 17 Dec 2027 to 16 Jan 2028 at 10%, actual days | 10,000 × 0.1 × (15 ÷ 365 + 15 ÷ 366) | 82.08 |
Before you charge late payment interest
- Check that your contract or invoice terms set out the rate, the days in a year, any grace period and any late fee, and that the customer agreed to them.
- Some countries give businesses a legal right to interest and fixed compensation on late invoices, at a rate set by law. Others cap interest or late fees, especially for consumers. These rules differ by country and change, so check your contract and local law.
- Send the customer a clear statement: the invoice, the due date, the days late, the rate and how the interest was worked out. The reminder email line (in Advanced) helps.
Interest is worked out on the invoice amount you enter (with or without sales tax, as your terms say). Amounts are rounded for display only. Day counts use calendar dates, so weekends and holidays count. This is a guide, not legal advice.
Common questions
How do I calculate interest on a late invoice?
Count the days from the due date to the day it is paid. Interest a day = invoice amount × yearly rate ÷ 365. Multiply by the days late. For example, 10,000 at 8% a year, 30 days late: 10,000 × 0.08 ÷ 365 = 2.19 a day, and 10,000 × 0.08 × 30 ÷ 365 = 65.75 in total.
What interest rate can I charge on a late payment?
Use the rate in your contract or invoice terms that the customer agreed to. Some countries also set a legal late-payment rate or a fixed compensation amount for business invoices, and some cap what you can charge. These differ by country and change over time, so check your contract and local law before you charge.
Should I use a 365-day or a 360-day year?
Use whatever your contract says. A 365-day year is the most common. A 360-day year charges a little more (about 1.4% more interest). "Actual" days count 366 days in a leap year. On 10,000 at 8% for 30 days, 365 gives 65.75 and 360 gives 66.67.
How does a grace period change the interest?
If the invoice is paid within the grace period, no interest or late fee is due. If it is paid later, interest usually runs from the end of the grace period, but some terms charge back to the original due date. With 10 grace days, 30 days late at 8% on 10,000 is 20 days of interest (43.84) or, back to the due date, 30 days (65.75).
What happens to the interest after a part payment?
Interest then runs only on what is still owed. 10,000 at 10% a year, 60 days late, with 4,000 paid after 30 days: 30 days on 10,000 (82.19) plus 30 days on 6,000 (49.32) = 131.51 of interest, so 6,131.51 is left to pay. If the payment clears the interest first, it is 132.18.
Is late payment interest simple or compound?
Usually simple: worked out on the unpaid invoice only. Some contracts add unpaid interest to the balance each month, so later interest is charged on it too. 10,000 at 1% a month for 3 months is 300 simple, or 303.01 compounding monthly.
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