Guide · Payments
How to write a late fee clause
A late fee only works if the client agreed to it before the invoice was due. The clause should be short, specific and easy to calculate.
Why the clause matters
You cannot add a late fee after the fact and expect it to be enforceable. Put it in the quote or contract, reference it on the invoice, and apply it consistently. State law may limit the rate or the way interest is calculated — check before you set a number.
What to include
- The rate: a percentage per month, a flat fee, or a daily rate.
- When it starts: the day after the due date, or after a short grace period.
- How it is calculated: simple interest on the outstanding balance, not compounding unless you say so.
- Any cap or minimum.
- What happens if the client disputes the invoice in good faith.
Three example clauses
1.5% per month. “Invoices are due Net 30. A late fee of 1.5% per month (18% per year) applies to any balance unpaid after the due date.”
Flat fee. “A late fee of $50 applies to any invoice unpaid 10 days after the due date, plus $10 per week thereafter.”
Daily rate. “A late fee of 0.05% per day applies to the outstanding balance from the due date until payment is received.”
Where to put it
Put the clause in the quote or contract where the client agrees to it, and repeat a short version on the invoice near the payment terms. “Late fee: 1.5% per month after the due date” is enough on the invoice if the contract has the full wording.
How much is reasonable?
There is no single national number. A rate that is common in one state can be unenforceable in another. Keep the fee proportionate to the balance and the delay, and check the limit before you enforce it. A $10 fee on a $200 invoice is easy to defend; a 10% monthly charge on a $50,000 invoice needs a lawyer’s review.
How to apply it
Do not surprise the client with a fee months later. Send the first reminder before the due date, then a specific reminder the day after, then apply the fee as stated. The reminder sequence gives you the emails.
When to waive it
Waiving a fee is a business decision, not a legal one. If the client is otherwise good and the delay was administrative, waiving the fee can preserve the relationship. If the balance is large or the delay is repeated, apply the terms consistently.
This is general information, not legal advice. Late fee and interest limits vary by state; ask a lawyer or check your state’s rules before enforcing a large fee.
Related
Payment terms and late payment
Net 30, due dates and a reminder sequence that works.
Late payment reminder emails
Three emails, a phone call and when to escalate.
When a client will not pay
Written demand, payment plan, small claims and collections.