What Is the Daily Interest on an Overdue Invoice? The Per-Diem Formula
The client is 47 days late and finally picks up the phone. You mention the interest clause, and they ask, reasonably enough, "what's that per day?" You freeze. Not because the math is hard, but because you have only ever thought of the interest as a lump sum at the end, and now you need a daily number on the spot. Learning how to calculate daily interest on an overdue invoice fixes that moment permanently. It is one line of arithmetic, and it turns every follow-up call into a conversation about a meter that is already running.
The formula
Daily interest = (unpaid balance x annual rate) / 365. Multiply by the number of days late for the total owed.
The annual rate comes from your contract first; if the contract is silent, your state's default rate applies (our state-by-state guide has those), and in the UK the statutory rate is 8% over the Bank of England base rate. For guidance on picking a defensible number, see what counts as a reasonable rate.
| Item | Amount |
|---|---|
| Unpaid balance | $8,500.00 |
| Annual interest (12% of $8,500) | $1,020.00 |
| Daily rate ($1,020 / 365) | $2.79 |
| Total interest ($2.79 x 47 days) | $131.34 |
Keep the unrounded daily figure ($2.7945) in your spreadsheet and round only the final total. Rounding the daily rate first and multiplying introduces a drift that grows with the day count.
Counting the days without an argument
Most day-count disputes are really due-date disputes. Start counting the day after the due date and count through the date the payment arrives. Invoice due March 1, paid April 17: 47 days. The due date itself is not late yet; the day after it is day 1.
Two things to lock down before anyone argues. First, the due date comes from your payment terms, not the invoice date. Net 30 on a March 1 invoice means March 31 is the due date and April 1 is day 1, not March 2. Second, partial payments reset the balance, not the clock. If the client paid $3,000 on day 20 of those 47 days, days 1 through 20 accrue on $8,500 and days 21 through 47 accrue on $5,500. Recalculate the daily rate at each payment.
The 360-day year catch
Some contracts specify a 360-day banking year instead of 365. The math is the same formula with a different divisor, and it produces a slightly larger daily rate: $1,020 / 360 = $2.83 a day instead of $2.79. Over 47 days that is a $1.82 difference, which is not worth fighting about. Over a year on a large balance, it adds up, which is why lenders like the convention.
If your contract is silent, use 365. Do not quietly adopt the 360 divisor to squeeze a few extra dollars out of a late payer; the daily rate has to be defensible if the client ever pushes back on it, and "the contract does not say" is not a defense.
Why the daily number is a collection tool
The client asking "what's that per day" was not stalling. They were doing the math on whether delay was still cheap, and a daily number answers that question in a way a lump sum never does. "You owe $131.34 in interest" is a bill to argue about. "Every day costs you $2.79" is a meter, and the meter is what gets the invoice paid.
Put the daily figure in your follow-ups explicitly. "This invoice is now 47 days past due, accruing $2.79 per day in interest under our agreement" does more work than another copy of the PDF. Our follow-up email sequence shows where to place it. And if the invoice crosses into compound-interest territory, read the simple vs compound guide before you change the math; compounding needs its own explicit clause.
My practical rule: compute the daily rate the day an invoice goes overdue, not the day you decide to enforce it. It takes 30 seconds, it sits in the invoice notes, and the next time someone asks "what's that per day," you will not freeze. You will read them the number.
Frequently asked questions
What is the formula for daily interest on an overdue invoice?
Daily interest = (unpaid balance x annual interest rate) / 365. Multiply the daily figure by the number of days late for the total. On an $8,500 invoice at 12% annual interest, the daily rate is $2.79.
Do I use a 365-day or 360-day year for invoice interest?
Use whatever your contract specifies. The default is 365. Some contracts specify a 360-day banking year, which divides the same annual rate into slightly larger daily chunks. If the contract is silent, use 365.
How do I count the days an invoice is late?
Start counting the day after the due date and count through the date payment arrives. If the invoice was due March 1 and paid April 17, that is 47 days late.
How do I convert a monthly interest rate to a daily rate?
Multiply the monthly rate by 12 to get the annual rate, then divide by 365. A 1.5% monthly rate is 18% annually, so the daily rate on a $10,000 balance is $4.93.
Should daily interest apply to the original invoice or the remaining balance?
The remaining balance. Recalculate the daily rate whenever a partial payment lands, and accrue only on what is still outstanding.
Working out interest on a late invoice?
Calculate it with your rate and dates, daily accrual included.
Calculate late-payment interest freeRelated: Should Late Payment Interest Be Simple or Compound on Invoices? · What Is a Reasonable Late Payment Interest Rate to Charge on Invoices? · The Overdue Invoice Follow-Up Email Sequence · State Late Payment Interest Rates for Invoices
One invoicing tip a week: subscribe to the newsletter.