What is a late fee?
A late fee is a penalty charged when an invoice isn't paid by its due date — often a flat amount or a monthly percentage like 1.5%. It must be stated in your payment terms before the invoice goes out; you can't invent it after the fact. Its real power is psychological: it makes your invoice the one that gets paid first.
In practice
A $2,000 invoice with '1.5% per month on overdue balances' paid 45 days late accrues $45 in late fees (1.5% x 1.5 months x $2,000). Many clients pay on day 29 just to avoid it.
Stop chasing late payments
Clear terms and late fees on every invoice — plus a guide to getting paid on time.
Read the late-payments guideFrequently asked questions
Are late fees legal?
Generally yes, if agreed in advance — but some states cap the rate, and consumer transactions have extra rules. Keep the rate reasonable (1–1.5% monthly is standard).
Do late fees actually get invoices paid faster?
Yes. The fee itself matters less than the signal: this supplier tracks due dates and enforces terms. Clients prioritize those invoices.
Should I waive a late fee for a good client?
Occasionally, as a goodwill gesture — and say so explicitly. A waived fee the client knows about builds loyalty; a silently dropped fee teaches them deadlines don't matter.