How it’s calculated
Late fee = overdue balance × annual interest rate ÷ 365 × days overdue, plus any one-time flat fee your contract sets. Simple interest on a 365-day count is the cleanest, most defensible convention; an 18% APR is the same as the widely used 1.5% per month.
daily interest = amount × APR ÷ 365 late fee = flat fee + daily interest × days overdue total due = invoice amount + late fee
Worked example
A $4,000 invoice 45 days overdue at 18% APR (≈1.5%/month), no flat fee.
- Daily accrual: $1.97
- Late fee: $88.77 — total now due $4,088.77 (+2.2%)
What’s a good number?
1–2% per month (12–24% APR) is standard and broadly enforceable; many jurisdictions cap interest, so check local usury limits before exceeding 1.5%/month. The fee's real job is incentive, not income.