#Statutory interest on unpaid invoices how to

One of the best ways to avoid late invoices is to send customers payment reminders. For example, you might want to introduce checks, money orders, or online payment portals on top of credit card payments.

If you’re working with a customer who has failed to settle payment reminders in the past, you might consider expanding your payment options to make it easier for them to compensate you. Contact information for easy reference.Send out an invoice with a late payment policyĪlways inform customers of your late filing penalty in the original contract and indicate the number of days they must settle before incurring a charge. Through our practical knowledge, implementing a late payment policy encourages customers to meet payment deadlines. The total outstanding balance will then become $15,150. The resulting number will be your monthly rate, which you multiply by the overdue balances to get your late fee charge.įor instance, if you have an annual interest rate of 12% on a $15,000 project, you’d get a monthly finance charge of $150. To calculate a reasonable interest rate, you first have to calculate an annual interest rate and divide that number by 12. How is late payment interest calculated?Īs mentioned, our research indicates that most businesses charge a flat penalty of 1% to 1.5% of the overdue amount. For instance, if you implement late charges within a net-30 period, it won’t make sense to charge interest if your customer pays within 29 days. You shouldn’t have to make a late payment charge if your customer settles their outstanding balance within the number of business days indicated in your original contract. When should you not charge a late payment penalty?

Yes! However, our investigation demonstrated that customers are not obligated to settle a late payment fee if it isn’t indicated in the contract terms.

Can you legally charge interest on overdue invoices? However, small companies tend to charge a late transaction payment interest rate of 1.5%, while larger enterprises charge 2.5% and up. What is the standard late payment interest on an invoice?īecause the government doesn’t regulate a business’ late payment fee, you can, in theory, charge whatever payment interest rate you see fit. Based on our observations, it’s best practice to allow a grace period for late invoices. Vendors can charge a late payment fee if a customer fails to pay their invoice on time, though our findings show that most will charge this amount after thirty days. When can you charge late payment interest? Our research indicates that you should always include the payment interest rate in your original contract and payment terms. Late transaction payment interest is an additional charge you add to an unpaid invoice.

#Statutory interest on unpaid invoices how to

Read on to find out how late payment fees work and how to calculate this number for your business. If you’re dealing with past-due invoices for the first time, knowing how to implement penalty charges can protect your business and ensure a healthy cash flow. While interest rate charges for unpaid invoices will vary according to your state, implementing late payment interest encourages customers to pay their outstanding balance on time.