Invoice Late Fee Wording

When a customer misses a payment deadline, clear and professional invoice late fee wording helps set expectations and encourages timely payment. Including this wording on your invoices not only protects your business but also fosters transparent communication, making it easier to enforce payment terms without damaging client relationships.

What Is Invoice Late Fee Wording

Invoice late fee wording refers to the specific language included in an invoice that explains the penalties or additional charges a client will incur if they fail to pay by the due date. This wording is important because it sets clear expectations and helps protect your business from delayed payments. 

It typically includes the amount or percentage of the late fee, the date it will be applied, and any recurring charges if the invoice remains unpaid over time. Effective late fee wording should be professional, straightforward, and consistent with your payment terms and policies. 

Clearly communicate the consequences of late payments to encourage timely settlements, maintain a healthy cash flow, and reinforce your professionalism.

Things to Include in the Late Fee Wording

When writing invoice late fee wording, it's important to be clear, professional, and legally sound. Here are the key things to include:

1. Late Fee Amount or Rate: Clearly state the late fee — either a flat fee (e.g., $25) or a percentage (e.g., 1.5% per month) of the outstanding balance.
2. Due Date or Grace Period: Mention when the late fee will apply — either immediately after the due date or after a grace period (e.g., “after 10 days past due”).
3. Calculation Method: If you're charging a percentage, explain whether it’s monthly, annual, or per day, and how it will be applied to the overdue balance.
4. Reminder of Payment Terms: Reference the original payment terms, such as "Net 30" or "payment due within 14 days."
5. Legal Disclaimer or Notice: Add a brief statement noting that the fee is in line with your terms and conditions, especially if agreed upon in a contract.
6. Consequences of Continued Nonpayment: Optionally, include a note about further action (e.g., suspension of services or collections) if invoices remain unpaid.
7. Tone and Clarity: Use professional, courteous language that maintains the client relationship but also communicates the importance of timely payment.

Example:

“Please note that payments not received within 10 days of the due date will incur a late fee of 1.5% per month on the outstanding balance, as outlined in our agreed terms.”

How to Charge Invoice Late Fees

Charging invoice late fees involves a few careful steps to ensure you stay professional, legal, and effective. Here’s how to do it:

1. Set Clear Late Fee Terms in Advance

Before charging any late fees, your payment terms — including the late fee policy — must be clearly stated in your contracts, proposals, or invoices. This includes:

• The due date
• The grace period (if any)
• The late fee amount or percentage
• How often the fee will apply (e.g., monthly or per day)

2. Include the Late Fee Policy on Every Invoice

Add a short, visible note to every invoice reminding clients of the potential late fee, like:
"A 2% monthly late fee applies to all balances unpaid 10 days after the due date."

3. Wait Until the Grace Period Ends

If you offer a grace period (e.g., 5 or 10 days), only apply the late fee once that time has passed without payment.

4. Add the Late Fee to the Invoice

You can either:

• Update the original invoice with the added late fee
• Send a new invoice just for the late fee amount, referencing the overdue invoice

Clearly label the fee as “Late Payment Fee” or “Interest on Overdue Invoice.”

5. Send a Polite Reminder

When applying the fee, send a friendly but firm reminder. For example:
"This is a reminder that Invoice #123 is now 10 days past due. As per our agreement, a late fee of $25 has been added to the balance."

6. Track and Follow Up

Use your invoicing or accounting software to track overdue payments. Follow up regularly until the payment (including the fee) is received.

7. Be Consistent

Apply your late fee policy consistently to all clients. This helps avoid disputes and shows that you treat all accounts fairly.

How Much Interest Can You Charge on Unpaid Invoices

In the U.S., you can typically charge interest on unpaid invoices if you and the client agreed to it beforehand, usually in a contract or invoice terms. The most commonly accepted rate is 1% to 1.5% per month (which equals 12% to 18% annually), and this is considered both fair and enforceable in most states.

However, you must stay within your state’s usury laws, which limit how much interest can legally be charged. These laws vary by state. For example:

• California allows up to 10% per year for non-contractual debts
• Texas generally caps interest at 6% unless a written agreement specifies a higher rate (up to 18%)
• New York sets a maximum of 16% for civil cases
• Florida allows up to 18% annually on balances below $500,000

If you charge more than your state allows, the fee may be unenforceable, and you could face penalties.