Late fee

What it means in practice

A late fee is usually a monthly percentage of the overdue balance, and sometimes a flat charge. It works as a deterrent rather than as income: most clients pay before it applies once they know it exists.

It has to be agreed before the work, which means it belongs on the quote and repeated on the invoice. A fee that first appears on a reminder is hard to enforce, and several states cap what you can charge.

Covered in full in the guide to chasing an unpaid invoice.

Where it shows up on the paperwork

It lives in the terms line on the quote and again on the invoice, stated as a rate and a period. When it applies, it appears on the notice as its own figure and a new total.

What goes wrong

• Charging a fee that was never on the quote, which is difficult to enforce and easy to argue with.
• Setting a rate high enough to look punitive, which several states will not uphold.
• Applying it to a client who is disputing the work rather than dodging the bill. Sort the dispute first.

The tools for this

Related terms

• Overdue invoiceAn invoice that has passed its due date without being paid.
• Payment termsThe line that says when payment is due, how to pay, and what happens if the date passes.
• DunningThe sequence of reminders sent to collect an overdue invoice.
• Due dateThe date payment on an invoice is expected, written as a date rather than a term.

All 57 terms