Calculate the late payment interest and total amount due on an overdue invoice using an annual, monthly, or daily interest rate and the number of days late.
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Late Payment Interest Formula
Late payment interest is simple interest charged on an overdue invoice for the period it remains unpaid. The amount depends on whether your rate is stated per year, per month, or per day.
I = P \times \dfrac{r}{100} \times \dfrac{d}{365}
Use this annual form when your rate is an annual percentage (for example a statutory rate). If your rate is quoted per month, replace 365 with 30 and use months overdue; if it is quoted per day, drop the division entirely:
I_{month} = P \times \dfrac{r}{100} \times \dfrac{d}{30}
I_{day} = P \times \dfrac{r}{100} \times d
The total amount the customer owes adds any fixed late fee to the interest:
Total = P + I + F
Where:
I is the late payment interest owed in dollars. P is the overdue (unpaid) invoice amount. r is the interest rate as a percentage. d is the number of days the payment is overdue. F is any fixed late fee added on top of the interest. For an annual rate you divide by the number of days in the year (365, or 360 if your contract uses a banker’s year) to get a daily rate, then multiply by the days overdue.
Common Late Payment Interest Rates
Rates vary by contract and jurisdiction. The table below shows typical figures so you can sanity-check the rate you enter.
| Rate basis | Typical value | Where it is used |
|---|---|---|
| Monthly finance charge | 1.0% to 1.5% per month | Common on US commercial invoices (about 12% to 18% per year) |
| UK statutory (B2B) | 8% plus base rate per year | Default rate when no rate is set in the contract |
| Flat late fee | 1.5% to 5% of the invoice | A one-time fee, entered separately from interest |
Interest on a $1,000 invoice grows with the days overdue. The table below uses a 12% annual rate and a 365-day year.
| Days overdue | Interest on $1,000 at 12%/yr |
|---|---|
| 15 days | $4.93 |
| 30 days | $9.86 |
| 60 days | $19.73 |
| 90 days | $29.59 |
Example Calculations
Example 1: A customer owes $2,500 on an invoice that is 30 days past due. Your contract sets an 8% annual interest rate and you use a 365-day year. The interest is 2500 times 0.08 times 30 divided by 365, which equals $16.44. The total amount due is $2,516.44.
Example 2: A $1,000 invoice is 45 days late and your terms charge 1.5% per month plus a $25 flat late fee. The interest is 1000 times 0.015 times 45 divided by 30, which equals $22.50. Adding the $25 fee gives a total amount due of $1,047.50.
Frequently Asked Questions
Is late payment interest simple or compound? Most late payment interest is simple interest, meaning it is charged only on the original unpaid amount and does not compound. This calculator uses simple interest.
What rate should I enter? Use the rate stated in your contract or invoice terms. If no rate is set, you can use the statutory rate that applies in your jurisdiction. Pick the matching rate period (per year, per month, or per day) so the math is correct.
How do I count the days overdue? Count from the day after the payment due date up to the day the payment is made or the date you are calculating to. Interest accrues for each day the invoice stays unpaid.