Late Payment Interest Calculator

About the Late Payment Interest Calculator

Late payment is one of the biggest problems small businesses face. Work has been done and costs have been paid, but the money that should cover them is sitting in someone else's account. Many contracts, and in some countries the law, give the supplier the right to charge interest on overdue invoices. Knowing exactly how much can be claimed makes it easier to chase the debt — and often the reminder alone is enough to get the invoice paid.

This late payment interest calculator works out the interest on an overdue amount from the annual rate and the number of days late. It shows the daily interest, the total to claim including any fixed late fee, and how much each further month of delay adds, so both you and your customer can see the cost of waiting.

How to Use the Late Payment Interest Calculator

Enter the overdue amount: the unpaid total of the invoice.

Enter the annual interest rate that applies. Use the rate in your contract if it sets one; otherwise use the statutory rate where you trade, if there is one.

Enter the number of days late: the days since the payment was due.

Optionally, enter any fixed late fee you are entitled to add.

How Late Payment Interest Is Calculated

  daily interest  =  amount × annual rate ÷ 365
  interest        =  daily interest × days late
  total claim     =  amount + interest + late fee

This is simple interest: it is charged on the original amount only, not on interest already added, which is how late payment interest normally works.

Step-by-Step Example

An invoice of 5,000, paid 45 days late, with interest at 8% a year.

  Daily interest:  5,000 × 8% ÷ 365    =  1.0959
  Interest:        1.0959 × 45         =  49.32
  Total claim:     5,000 + 49.32       =  5,049.32
  Each 30 days:    1.0959 × 30         =  32.88

Which Rate Applies?

Your contract comes first. If your terms and conditions set a late payment rate, and the customer agreed to them, that rate normally applies. It is worth including a clear clause in every contract and on every invoice.

Statutory interest. Some countries set a rate by law for late commercial payments. In the United Kingdom, for example, businesses can claim statutory interest of 8% above the Bank of England base rate on late payments from other businesses, together with fixed compensation that depends on the size of the debt. Other countries have their own schemes, often based on a central bank reference rate.

Consumer sales are different. Rules for charging interest to private individuals are usually stricter, and the contract terms must be clear and fair.

Because rules change and differ widely, check the current rate and conditions for your situation before making a formal claim.

How to Claim Late Payment Interest

Send a reminder first. Many late payments are oversights. A polite reminder with a copy of the invoice often resolves them.

Show the figures. If payment is still late, write to the customer stating the amount owed, the interest that has built up, the rate and how it was worked out, and the daily amount that continues to accrue.

Set a deadline. Give a clear date for payment and explain what you will do if it is missed.

Keep records. Keep copies of the invoice, reminders and any replies.

Consider the relationship. For a valued customer who is late once, waiving interest can be a sensible gesture. For a customer who pays late repeatedly, charging it can change their habits.

Preventing Late Payment

Clear payment terms, stated on the invoice and in the contract, are the best protection. Invoice promptly, make it easy to pay, ask for deposits on larger jobs, and send reminders before the due date as well as after it. Checking a new customer's payment record before offering credit can also save a lot of trouble.

Interest and Your Cash Flow

Interest compensates for the cost of waiting, but it rarely makes up for the real damage late payment does. While an invoice is unpaid, the business may be paying overdraft interest of its own, delaying its own suppliers, or turning down new work because it cannot fund it. That is why prevention and prompt chasing matter more than the interest itself. Treat the calculated figure as leverage to get paid, and keep an eye on how much of your income is tied up in overdue invoices at any one time.

A Note on Records

Keep the invoice, reminders and any replies together in one place.

Understanding Your Result

Interest is the amount built up over the days late.

Daily interest is how much is added for each day the invoice stays unpaid.

Total to claim adds the interest and any fee to the original amount.

Each further month shows what another 30 days of delay would add.

Worth knowing explains when interest starts and where to check the rate.

When Should You Use This Calculator?

Chasing an overdue invoice.

Writing a final demand or letter before action.

Showing a customer what late payment is costing them.

Checking a claim made against your own business.

Deciding whether to pursue a small overdue amount.

Common Mistakes

Counting from the invoice date instead of the due date.

Charging compound interest when only simple interest is allowed.

Using the wrong rate for the contract or country.

Forgetting the fixed compensation some schemes allow.

Not stating payment terms on the invoice in the first place.