Summary
Enforceable late fee wording names the rate or amount, the grace period and the day the fee starts, and it must be in your invoice terms or contract before the invoice is sent. Use a percentage clause, a flat fee clause, or a statutory interest clause depending on your market, then apply it consistently.
- Percentage clause: "A late fee of [1.5]% per month applies to any balance unpaid [30] days after the due date."
- Flat fee clause: "A late fee of [$25] is added to any invoice not paid within [30] days of the due date."
- Automate it: Paidnice applies a written late fee policy automatically once the grace period passes, so the wording only has to be right once.
Why wording is not the hard part
The hard part of a late fee is not the sentence on the invoice; it is getting the clause into the contract or terms before the invoice is raised, since a late fee added after the fact is rarely enforceable, and then applying it to every overdue invoice. The most common failure we see is a perfectly good clause buried in a contract that nobody enforces, because adding fees by hand is fiddly and slightly awkward, so it quietly never happens.
A late fee clause takes one of three shapes: a percentage of the overdue balance per month, a flat fee added once the invoice is overdue, or, for UK business invoices, statutory interest at 8% above the Bank of England base rate, which is 11.75% a year at the current 3.75% Bank Rate. The generator below builds any of them from your payment term, rate and grace period.
Late fee clause generator
Set your terms below and copy a ready-to-use clause for your contract, invoice or terms of service. Adjust the bracketed details to fit your business.
This generator produces general wording, not legal advice. Check the rules for your country and have important contracts reviewed by a professional.
Before you charge anyone, make sure the fee will actually hold up.
Make your late fee actually enforceable
A late fee is enforceable when it was disclosed and agreed before the sale and is reasonable against the real cost of late payment. Tick all five before you charge anyone.
- Agreed in advance. The customer accepted your terms before the work started or the fee applied.
- In writing, in the contract. The full policy lives in your agreement, with a short reminder on every invoice.
- Clear amount or rate. State the exact fee or interest rate, and precisely when it starts.
- Reasonable, not a penalty. Tie it to a genuine cost of late payment rather than punishment.
- Lawful where you operate. Stay within any statutory cap or rate rules for your country.
The first decision is how you will charge. Most businesses pick one of three structures.
The three types of late fee
The three types of late fee are a fixed (flat) fee, interest as a percentage of the overdue balance, and a combined clause that uses both. Decide which before you word your policy.
A set amount added once an invoice is overdue, for example $25.
Best forsmall or one-off invoices, simplicity.
Watch outa flat fee on a large invoice can look unreasonable.
A percentage of the overdue balance, usually charged daily until paid.
Best forlarger invoices, debts that drag on.
Watch outthe rate must be lawful for your country.
A fixed fee first, then interest after a set point or above a threshold.
Best formixed invoice sizes, firm but fair terms.
Watch outspell out exactly when each part applies.
Wording only protects you if it is visible at the right moments, before and after the sale.
Where to put your late fee wording
Late fee wording belongs in the contract or terms in full and as a one-line reminder on every invoice, with a mention at checkout and in overdue emails. Cover these four spots.
Publish your terms and show a short disclaimer at the booking or checkout step.
Include the full late fee policy in your agreement when a new client signs on.
Add a one-line reminder of the policy on the invoice itself as a prompt to pay.
Reference the late fee in your overdue reminders, before and after it is applied.
Copy-paste late fee templates
Each late fee template below is a self-contained clause or email: swap the bracketed details for your own payment term, amount and rate, then drop it into your invoices, contracts and reminders.
Thank you for your business. Payment is due in full within [30] days of receipt. Overdue balances are subject to a late payment fee as set out in your agreed terms.
All services are invoiced [on completion] and payable within [30] days. If payment is not received within those [30] days, overdue balances will be charged [a fixed fee of $25] [interest at 3% per month, charged daily until the balance is paid in full].
By accepting this agreement, you agree to settle all invoices within [30] days of receipt. Overdue balances are subject to a late payment fee of [$25] once the due date has passed. Unpaid balances over [$1,000] also accrue interest at [3%] per month, charged daily until the balance is paid in full.
Hi [Client], Our records show invoice [#1234] for [$5,000] became due yesterday and is not yet paid. To avoid any late fees under our payment terms, please arrange payment at your earliest convenience. If there is a problem, just let me know. If payment has already been sent, please ignore this note. Thanks, [Your name]
Hi [Client], Invoice [#1234] for [$5,000] was due on [date] and remains unpaid. In line with our payment terms, a late fee of [$25] has been applied, and interest of [3%] per month is now accruing daily until the balance is cleared. Please settle the overdue balance to stop further charges. Kind regards, [Your name]
Overdue accounts are subject to statutory interest at 8% above the Bank of England base rate, plus fixed compensation of £40 to £100 per invoice, in line with the Late Payment of Commercial Debts (Interest) Act 1998. Reasonable recovery costs may also apply.
What to say when an invoice is overdue?
When an invoice is overdue, state the amount overdue, the number of days past the due date, and the fee or interest that now applies, in a short factual reminder rather than an apology or a threat. The two reminder templates above follow that shape: the first names the fee that will apply, the second names the fee that has applied. Keep the tone the same in both; the number on the statement does the persuading.
When should you not charge a late fee?
Do not charge a late fee on an invoice that is still inside its grace period, on a disputed invoice until the dispute is settled, or on a customer whose terms never included the fee. Everything else gets the fee, by rule. A grace period, a set number of days overdue before the fee applies, is the tool that spares the customer who is a few days late; discretion invoice by invoice is not, because a fee applied to some customers and not others is easy to dispute and reads as personal. The late fee is leverage: it changes payment behavior because the customer knows it will be applied, every time.
Late fee laws by country
Late fee law differs by country: the UK gives a statutory right to interest on business invoices, plus a fixed sum of £40 on debts up to £999.99, £70 from £1,000 to £9,999.99 and £100 from £10,000, per GOV.UK, while the US, Australia, Canada, New Zealand, Singapore and South Africa leave the fee to your contract, subject to reasonableness and any local cap.
| Country | Rule | Guide |
|---|---|---|
| United Kingdom | Statutory: 8% above the Bank of England base rate plus £40 to £100 per invoice on B2B debts | UK late payment fees |
| United States | Contract, capped by state usury law; 35 states set no maximum late fee | Late fee laws by state |
| Australia | Contract; no statutory rate, up to about 10% a year is common and must be reasonable | Australia |
| Canada | Contract; 1.5% to 2% per month is common and must be reasonable | Canada |
| New Zealand | Contract; around 2% per month is common | New Zealand |
| Singapore | Contract; 1% to 1.5% per month is common outside regulated sectors | Singapore |
| South Africa | Contract; 1.5% to 4% per month is common, kept reasonable and in your terms | South Africa |
Late fee policy wording: FAQ
Do I need a written late fee policy to charge late fees?
In most cases, yes. A late fee is generally only enforceable if the customer agreed to it in advance, so the policy needs to be in your contract or terms and accepted before the work or the fee. The UK is an exception for business-to-business invoices, where statutory interest applies automatically even without a clause.
What should a late fee policy include?
Four things: your payment term (for example 30 days), the type of fee (fixed, interest, or both), the exact amount or rate, and precisely when it starts. Optionally add a short grace period. The generator above assembles all of this into a ready clause.
Is a $25 or 10% late fee enforceable?
It can be, as long as it was agreed in advance, is clearly worded, reflects a genuine cost of late payment rather than a penalty, and stays within any legal cap for your country. A flat fee that is large relative to the invoice, or a rate above a statutory limit, is the most likely to be challenged.
Where should I put my late fee wording?
In your contract or terms of service in full, with a short reminder line on every invoice, plus a mention in your overdue reminder emails. For online businesses, also show it at the checkout or booking step.
Can I charge both a fixed fee and interest?
Yes. A combined policy is common: a fixed fee once an invoice is overdue, then interest on the outstanding balance, often above a value threshold. Just spell out clearly when each part applies.
Do late fee rules vary by country?
Yes, quite a lot. Caps, allowable rates and statutory entitlements differ between the US, UK, Canada, Australia, New Zealand, Singapore and South Africa. Check the guide for your country before you set a rate.
Should I always charge a late fee?
Charge it on every invoice that passes your grace period, by rule. A late fee applied to some customers and not others is easy to dispute and reads as personal. Use a short grace period, not discretion, to spare a good customer who is a few days late.
How do you write a late fee on an invoice?
Write one line in the invoice terms that names the fee and the day it starts, for example "A late fee of 1.5% per month applies to any balance unpaid 30 days after the due date", and keep the full policy in your contract or terms of service.
Keep reading
Stop enforcing the fee by hand
Paidnice turns the clause you just wrote into a late fee policy with the same three settings: the fee or rate, the grace period (a set number of days overdue before the fee applies) and whether interest compounds, where the "Include previous interest charges" toggle is on by default, so simple interest is a deliberate choice. Paidnice then applies the late fees and interest to overdue invoices automatically in Xero and QuickBooks, sends the reminders, and keeps a full audit trail, so the payment terms you just wrote actually get enforced. It is one of the levers our customers use to cut their days sales outstanding by around 50% in the first 30 days.
On Xero or QuickBooks? Sign up to Paidnice free, no card needed, and put your late fee policy on autopilot.
This article is general information, not legal advice. For wording specific to your industry or country, check with a qualified professional.
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