Late payment interest calculator — overdue invoices
Calculate interest on an overdue invoice using simple or daily-compound accrual. See the daily rate, interest per day, and the total now due.
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Short answer
Interest on a late invoice is the principal times the daily rate times the days late. Divide your contractual annual rate by 365 to get the daily rate: 12% ÷ 365 = 0.032877% per day. On a $42,500 invoice 47 days late that is $656.71 simple, or $661.70 with daily compounding. Use the rate in your own contract.
Charging interest on a late invoice is arithmetic, not a negotiation. What people get wrong is the day count and the rate basis: annual rate divided by 365, applied to calendar days from the day after the due date. Everything else follows.
Enter the balance, the days late and the rate your contract allows. You get the daily rate, interest per day, the accrued figure under simple and daily-compound accrual, any fixed fee, the total now due, and a schedule showing what the same invoice costs at 30, 60, 90, 180 and 365 days.
Your numbers
$
Principal outstanding after part payments and credit notes.
days
Calendar days from the day after the due date to today.
%
From your contract, or the statutory rate where you trade. We do not assume a rate.
Accrual method
365 unless your contract or facility is quoted on a 360-day year.
$
Only if your terms or local rules allow a flat charge. Leave at 0 if not.
Result
Interest accrued (simple)
$656.71
$43,196.71 now due, including $42,500 principal and $40.00 of fees
Daily interest rate0.032877%
Interest per day$13.97
Interest per further week$97.81
Total now due$43,196.71
Cost of the delay, as % of invoice1.64%
Compounding premium over simple$4.99
Running total at simple interest, 12.0% a year on a 365-day basis.
Days late
Interest
Fee
Total due
30 days
$419.18
$40.00
$42,959.18
47 days
$656.71
$40.00
$43,196.71
60 days
$838.36
$40.00
$43,378.36
90 days
$1,257.53
$40.00
$43,797.53
180 days
$2,515.07
$40.00
$45,055.07
365 days
$5,100.00
$40.00
$47,640.00
Daily rate = 12.0% ÷ 365 = 0.032877% per day
Interest per day = $42,500 × 0.00032877 = $13.97
Interest = $13.97 × 47 days = $656.71
Other method for comparison = $661.70
Total due = $42,500 + $656.71 + $40.00 = $43,196.71
$656.71 accrued, 1.64% of the invoice, growing by $97.81 a week. Put it on the statement now rather than raising it at day 90 — interest introduced during an escalation reads as a bargaining chip.
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The formula
Simple: Interest = Principal × (Annual rate ÷ Day basis) × Days late · Compound: Interest = Principal × [(1 + Annual rate ÷ Day basis) ^ Days late − 1]
Principal
The unpaid invoice balance, after any part payments and credit notes.
Annual rate
The rate your contract or your jurisdiction's late-payment rules allow. Enter it yourself — this tool assumes none.
Day basis
365 for a calendar year, 360 if your contract or facility is quoted on a 30-day-month convention.
Days late
Calendar days from the day after the due date to the date of calculation.
Simple interest is the default in most commercial contracts and in most statutory late-payment regimes. Daily compounding only applies where the contract says so explicitly. The gap is small over weeks and material over years: at 12% on $42,500, compounding adds $4.99 after 47 days and $318 after a year.
Worked example
Invoice amount
$42,500
Days late
47
Annual rate
12%
Fixed late fee
$40
Result
$656.71 interest · $43,196.71 now due
The daily rate is 12% ÷ 365 = 0.032877%, which on $42,500 is $13.97 a day. Over 47 days simple interest is $656.71; with daily compounding it is $661.70. Add the $40 fee and $43,196.71 is now due. The delay has cost 1.64% of the invoice, and every further week adds another $97.81.
How late payment interest is calculated
Take the annual rate, divide by the day basis to get a daily rate, multiply by the outstanding principal to get interest per day, then multiply by days late. At 12% on $42,500 that chain is 0.032877% → $13.97 a day → $656.71 over 47 days. Working in daily units rather than monthly avoids arguments about whether February counts as a month.
Decision
Common practice
Why it matters
Day basis
365 (actual/365)
A 360 basis raises the daily rate by 1.39% of itself — trivial per invoice, visible across a ledger.
First day counted
The day after the due date
Counting the due date itself adds a day of interest you may have to concede in a dispute.
Accrual method
Simple, unless the contract says otherwise
Compounding without a contractual basis is the most common reason an interest charge gets written off.
Base amount
Unpaid principal only
Interest on tax you have already remitted, or on a disputed line, weakens the whole claim.
Part payments
Reduce the principal from the payment date
Charging on the original balance after a part payment overstates the claim and invites a challenge.
Simple versus compound
Simple interest accrues on the original principal only. Daily compounding accrues on principal plus interest already accrued, so the balance grows slightly faster each day. Over 47 days at 12% the difference on a $42,500 invoice is $4.99 — not worth a fight. Over a year it is roughly $318, and over three years it is the difference between a rounding error and a real number.
Use simple unless your terms and conditions explicitly provide for compounding. Most statutory regimes are simple-interest by default.
Compound daily, not monthly, if you compound at all — monthly compounding needs the contract to define the month.
Never switch methods mid-claim. A recalculation part way through a dispute reads as an invented number.
Using interest as a collections lever
Interest recovers a fraction of the cost of a late payment; its real value is as a deadline with teeth. Two things make it work: the charge appears on the statement automatically rather than after an internal argument, and the customer was told at day 1 that it would. Interest first raised at day 90 during an escalation is a bargaining chip, not a policy.
Doing it across the whole ledger
One invoice takes a minute. The useful version is every overdue invoice with its own due date, part payments and credit notes, aged to today and totalled by customer — which is a query, not a spreadsheet. Ask ERPray for interest accrued by customer at your contractual rate and the SuiteQL comes with the number, so the definition of "days late" is auditable before you invoice anyone.
Frequently asked questions
How do you calculate interest on an overdue invoice?
Divide the annual rate by 365 to get a daily rate, multiply by the unpaid principal for interest per day, then multiply by the number of days late. At 12% a year, $42,500 accrues $13.97 a day, so 47 days late is $656.71. Count from the day after the due date.
What interest rate can I charge on a late payment?
Whatever your signed terms specify, subject to the law where you trade. Many jurisdictions set a statutory rate for commercial debts and cap what you can charge without a contractual clause, and those rates change. Look up the current figure for your jurisdiction, or use your contract rate, and enter it here rather than assuming a default.
Should late payment interest be simple or compound?
Simple, unless your terms and conditions explicitly allow compounding. Simple interest is the default in most commercial contracts and statutory regimes. The practical difference is small over weeks — about $5 on a $42,500 invoice 47 days late at 12% — and large over years, which is when the contractual basis gets tested.
Do you count the due date as a day late?
No. Interest normally runs from the day after the due date, because the customer had the whole due date to pay. Counting the due date adds one day of interest that a customer can reasonably dispute. Be consistent across the ledger so your figures reconcile when someone checks them.
Can I charge a fixed late fee as well as interest?
Only if your contract provides for it, or local rules allow a fixed recovery amount alongside interest. Where permitted it is usually a flat sum per invoice rather than a percentage. Enter it in the fixed-fee field so it sits separately from the interest line on your statement.
Does late payment interest apply to the tax on the invoice?
Practice varies and it depends on your contract and jurisdiction. Charging interest on tax you have already remitted is common in some regimes and disputed in others. The safe default is to accrue on the net principal and take advice before including tax, because a contested base can undermine an otherwise valid claim.
This calculator needs you to find the inputs first. ERPray pulls them from your own ERP account and computes the answer live — with the exact query shown so you can check it.