Late payment fee: how to charge one on a freelance invoice

A late payment fee is an extra charge added to an invoice that is not paid by its due date. Freelancers commonly use about 1.5% of the unpaid amount per month, but a fee only works if the client agreed to it in writing before you started. This guide shows how to set one, where to write it, and what to do when you would rather not charge it at all.

How much is a normal late payment fee?

The most quoted figure for freelancers is 1.5% per month on the unpaid amount. The Freelancers Union gives "1.5% of interest per month after the payment due date" as one typical fee, and Invoicemaker, citing KeeperTax, says freelancers average about 1.5% per month. Invoicemaker also describes the other common shape: a flat amount for each week past due, for example $5, or a percentage such as 3% of the balance.

The fee does not need to be large. Its job is to make paying on time the easier choice. Here is how the two shapes compare on the same invoice:

The prorated amount is the invoice × 1.5% × (days late ÷ 30). These are examples, not recommendations: a flat fee that looks small can be a large share of a small invoice, which is harder to defend, so work out the percentage it equals.

When do you have to agree a late fee?

Before the work starts. A late fee should always be specified ahead of time in a written agreement, such as a signed contract or an email exchange, according to Invoicemaker. The Freelancers Union advice is the same: put the fee in your contracts and on your invoices.

That gives you three places to say it, and the same words should appear in all three:

1. Your quote or contract, as one clause. See what a freelance contract needs.
2. Your deposit invoice, so the client sees it again when they pay.
3. Every later invoice, in the notes next to the due date.

If the fee was never agreed, do not add it to an invoice that is already late. Ask for the original amount, and write the fee into your terms for the next job.

What should the late fee clause say?

A good clause answers four questions: when it starts, how much it is, how it is calculated and that the client accepted it. Wording you can adapt:

Invoices are due 14 days after the invoice date. Payments received more than 5 days after the due date will have a late fee of 1.5% of the unpaid balance added for each month the invoice remains unpaid, calculated daily. By accepting this agreement, you agree to this fee.

Then repeat the short version on the invoice:

Due [date]. A late fee of 1.5% per month applies to amounts unpaid 5 days after the due date.

Notice the grace period. Offering a few days before the fee begins is suggested by Invoicemaker, and it keeps the fee for clients who are really late.

What are the legal limits on late fees?

They differ by country and by state, and many places limit interest and fees, so check the rules where you and the client are before you set a rate. Invoicemaker lists maximum rates for every U.S. state with the statute for each, and says to check them before relying on them. If you use a flat fee, work out the percentage it equals to see whether it fits the limit. This guide does not say what the law is in your case, and a lawyer should look at anything large.

How do you apply a late fee without losing the client?

Tell them before you charge it. Send the first reminder the day after the due date, with no fee mentioned; the overdue invoice email sequence has the wording. If the invoice is still unpaid when the grace period ends, send a short note:

Hi [Name], invoice [number] for $[amount] was due on [date] and is still open. As agreed in our contract, a late fee of 1.5% per month now applies. The updated total today is $[amount]. You can pay here: [link]. If this has already been paid, tell me the date and I will check.

Keep it factual. The aim is to be paid, not to win an argument.

When is a late fee not worth it?

On small invoices. A 1.5% monthly fee on a $300 UGC video is $4.50, which is not an incentive. For small deals, these do more:

• A deposit before work starts, so less of the fee is ever at risk. See invoice payment terms for how to choose Net 7, Net 15 or due on receipt.
• A short term, such as Net 7 for new clients, so the date comes sooner.
• Pausing new work until the invoice is paid, stated in writing in advance.

Most creators bill brands per video, so how to invoice a brand covers the whole flow, from deposit to final invoice.

Checklist before you add a late fee

• The fee is in your contract or quote, and the client accepted it before work began
• The same wording is on the deposit invoice and every later invoice
• The due date and the grace period are both written out
• You worked out the fee as a percentage and checked it against the limits where you and the client are
• Your first reminder does not mention the fee

This isn't legal advice, and a lawyer should look at big deals.