The calculator does the arithmetic only. Whether you can charge a late fee or late payment interest at all depends on your agreement and on where you trade, covered further down.
The four ways a late fee is usually worded
| Wording in the agreement | How it is worked out | $1,000 due 1 March 2026, paid 31 March |
|---|---|---|
| Flat fee, such as $25 | The fixed amount, once | $25.00 |
| One-off percentage, such as 5% | That share of the balance, once | $50.00 |
| Monthly percentage, prorated by the day | Balance × rate × days late ÷ (365 ÷ 12) | $14.79 at 1.5% |
| Monthly percentage, per started month | Balance × rate × each calendar month or part of one begun since the due date | $15.00 at 1.5% |
| Annual rate, by the day | Balance × rate × days late ÷ 365 | $14.79 at 18% |
Percentage rules are simple interest on the unpaid balance, never compounded, and every fee is rounded to the nearest cent once, at the end.
How days late and the grace period are counted
Days late start on the day after the due date: paid on the due date is on time, paid the next day is one day late. Every calendar day counts, and a weekend due date is not moved. If you have payment terms rather than a due date, work the due date out from the invoice date first.
In this calculator, a grace period means no fee at all if payment arrives within it, up to and including its last day. Once it has passed, the fee counts from the due date, as if there had been no grace period; if your clause charges only from the end of the grace period, the third question below shows how to enter it. On $1,000 due 31 January 2026 with 15 days' grace at 1.5% a month prorated, payment on 15 February costs nothing and payment on 16 February costs $7.89, for all 16 days.
Why 1.5% a month prorated is 18% a year
For the prorated rule a month is 365 ÷ 12 days, about 30.42, so 1.5% a month charged by the day is exactly 18% a year charged by the day, and the two always give the same fee. Per started month counts calendar months from the due date and charges a whole one as soon as it begins, so it comes to much more on short delays: one day late on $1,000 costs $0.49 prorated but $15.00 per started month. Over whole months the two land close together, because a calendar month runs 28 to 31 days rather than 30.42.
A worked example
A $1,000 invoice is due on 1 March 2026 and paid on 31 March 2026, which is 30 days late.
- 1.5% a month, prorated: $1,000 × 1.5% × 30 ÷ 30.4167 = $14.79, so $1,014.79 in total.
- 18% a year, by the day: $1,000 × 18% × 30 ÷ 365 = $14.79, the same.
- 1.5% a month, per started month: payment came within the first calendar month after the due date, so one month is charged: $15.00, or $1,015.00 in total. Paid on 1 April it is still one month; paid on 2 April a second month has begun and the fee is $30.00.
The fee has to be in the agreement first
In the US, a late fee generally has to come from the agreement the client accepted before the work began; a rate first added to an invoice afterwards is a request rather than an obligation, as chasing an overdue invoice explains. The clause should name a rate and a period: see writing a late-fee clause into your payment terms. Some states cap late fees and interest and the rules differ, so check the rules of the state whose law governs your agreement before choosing a rate. A few cases run on statute rather than contract: federal agencies owe interest on late payments under the Prompt Payment Act, and some states set deadlines and interest for construction and public contracts. Outside the US the rules differ again; in the UK, for example, a late payment between businesses carries statutory interest unless the contract sets a substantial remedy of its own. This is not legal advice.
RunwayDue's reminders on unpaid invoices start chasing before a fee comes into it. They are on Pro, at $15 a month billed annually or $17 month to month, are off until you switch them on, and by default go out 3 days before the due date, on it, then 7, 14 and 30 days after, skipping weekends. The other free calculators cover due dates and cash runway.
Frequently asked questions
Does the calculator compound the fee?
No. A fee is never added to the balance and charged on again. If your agreement compounds, it can come to more than the figure shown here.
Should I choose prorated or per started month?
Whichever your agreement describes. "For each month or part of a month" is per started month, counted here in calendar months from the due date; a monthly rate charged by the day is prorated. Where the wording is unclear, note that per started month comes to more on a short delay, a whole month's charge for a few days.
What if my clause starts the fee only when the grace period ends?
This calculator counts from the due date once the grace period has passed. If your clause runs the fee only from the end of the grace period, enter its last day as the due date and set the grace period to zero. For example, on $1,000 due 31 January 2026 with 15 days' grace at 1.5% a month prorated, payment on 16 February then costs $0.49 for one day rather than $7.89 for all 16.
The client paid part of the invoice. What balance do I enter?
The amount still unpaid. The calculator applies one balance to the whole late period, so with a daily rule (prorated or annual) and a part payment along the way, run it twice and add the fees: the full balance from the due date to the part payment, then the remainder from that date to final payment, with no grace period on the second run.