A late fee works when it is announced in advance and applied without drama. Announced after the fact, it reads as a penalty and costs you the client relationship. Here is how to set one up so you rarely have to charge it at all.
Set the rule before the work starts
Put the late fee in the contract or the invoice terms, in plain words: "A late fee of 1.5% per month applies to balances unpaid 30 days after the due date." If the client signed that line, charging the fee later is just arithmetic, not a confrontation.
Percentage vs flat fee
- Percentage: 1.5% per month is the common figure for small businesses and freelancers. It scales with the invoice size.
- Flat fee: $25 or $50 per late invoice works for small amounts where 1.5% would be a few cents.
Some jurisdictions cap late fees, and B2B contracts in some regions limit interest to a statutory rate. Check your local rules once, write the allowed number into your template, and reuse it.
The math, with an example
Invoice: $2,000. Terms: Net 15. Client pays 45 days late, and your fee is 1.5% per month.
- Months late: 45 days is one full month plus part of another. Charge one month: $2,000 x 1.5% = $30.
- New total: $2,030, stated on a follow-up invoice or payment reminder with the original invoice number.
When to waive it
Waive it for a first offense from a good client, with a note: "Fee waived this time. The term applies from now on." You keep the relationship and keep the rule. Waive it silently and the rule dies. The point of a late fee is rarely the money; it is that your invoices move to the top of the client's payment queue.
Send the revised invoice with the free invoice generator, keeping the original invoice number so both sides can trace the trail.