Late payment interest calculator

How the calculation works

Interest is worked out as simple interest on the amount still outstanding. The annual rate is divided by the day count to get a daily figure, then multiplied by the number of days between the due date and the date you are calculating to.

So 2,500 outstanding at 8% a year, on a 365 day basis, accrues about 0.55 a day. Thirty days past due, that is roughly 16.44 in interest. Any fixed late fee your terms allow is added on top of that, not compounded into it.

Interest runs from the day after payment was due, so an invoice due today has not accrued anything yet.

Before you invoice interest

The right to charge has to exist before the debt does. If your payment terms do not mention interest and no statutory right applies where you trade, adding it to an invoice after the fact is unlikely to stand up. Where you do have the right, it is worth showing the calculation on the invoice — the amount, the rate, the number of days — rather than presenting a single unexplained figure.

This is a calculator, not legal advice.

Common questions

Can I charge interest on a late invoice?

Generally yes, provided the right to charge it was agreed before the work started — usually as a line in your payment terms, quote or contract. Several countries also give suppliers a statutory right to interest on overdue commercial invoices even where the contract is silent, at a rate set in legislation. Which applies to you depends on where you and your customer are, so check locally before invoicing interest.

What is the difference between 365 and 360 day counts?

It is the divisor used to turn an annual rate into a daily one. Actual/365 divides by 365 and is the common default for commercial terms. Actual/360 divides by 360, which makes each day fractionally more expensive and appears in some banking and finance contracts. Use whichever your terms specify; the difference is around 1.4%.

Should interest compound?

For overdue trade invoices, simple interest is the normal approach and is what this calculator uses — interest accrues on the original amount and does not itself start earning interest. Compounding on late commercial payments is unusual and in some jurisdictions is not enforceable, so do not apply it unless your terms say so explicitly and you have checked that it holds where you are.