Late Payment Interest: The Invoice Wording That Actually Gets Paid
The late payment interest wording on your invoice has one job, and it is not winning in court. It is making the accounts-payable clerk sort your invoice into the "pay this one first" pile. A short, specific clause does that. A paragraph of legalese gets skimmed and ignored. Below is the clause I would use, line by line, with what each part does.
The clause
Payment terms. Payment is due within 30 days of the invoice date ("Due Date").
Late interest. Amounts unpaid after the Due Date accrue simple interest at 1.5% per month (18% per annum), calculated from the Due Date until paid.
Partial payments. Partial payments apply first to accrued interest, then to the oldest outstanding principal.
Collection costs. The client is responsible for reasonable costs of collection, including attorney's fees, if the invoice remains unpaid 90 days after the Due Date.
Four lines. That is the whole thing. If you are skimming, that is the artifact; the rest of this piece is the manual.
What each line does
The due-date line looks trivial and does the most work. Most late-payment disputes are not about the rate; they are about when the clock started. "Net 30" means 30 days from the invoice date, not from when the client "got around to it." Write the number.
The interest line sets 1.5% per month because it is the commercial standard, which makes it defensible. "Defensible" is the word that matters: a rate the client has seen before produces a payment, while a creative rate produces a phone call. Simple interest, not compound, because compound on a $4,800 invoice looks punitive and simple is trivially calculable, which the clerk appreciates.
The partial-payments line answers the question every slow payer asks: does this $500 reduce the interest or the balance? Answer it in the clause and you skip the argument. Interest first is the standard ordering.
The collection-costs line is the one most freelancers skip, and it is the one that changes behavior. A client will risk $87 in interest. They will not risk a collections letter that bills them for the lawyer. You will probably never invoke it. That is the point.
How to adapt it
Swap the rate for your state's ceiling if you want to go higher; state default rates run 6% to 15% where no rate is agreed, and going above your state's limit can void the clause. Change Net 30 to Net 15 for small invoices or Net 60 for enterprise clients who physically cannot pay faster. If you bill in the UK, the statutory right already gives you 8% over the Bank of England base rate plus £40 to £100 per invoice, so the clause is a reminder, not the source of your right.
Put the real clause in the contract or signed terms, not just the invoice footer. In most US states the signed agreement is what makes it enforceable; the invoice footer sets expectations and speeds payment. Do both.
Where it breaks
Three failure modes. First, consumer clients: many states restrict or ban interest and fees on consumer debt, and a clause written for business clients can be unenforceable against individuals. Second, existing contracts: you cannot add a late-interest clause to invoices under a contract that already defines payment terms without an amendment; the old contract wins. Third, the rate: anything that smells like a penalty rather than compensation for the time value of money gets scrutinized. 1.5% a month has survived that scrutiny for decades. 5% a month has not.
And the line that breaks most often in practice is the last one, the collection-costs clause, because people write it and then feel awkward invoking it. Write it anyway. The clause works hardest in the months you never mention it.
Wondering what the interest adds up to?
Run your overdue invoice through the calculator and see the number.
Calculate late-payment interest freeFrequently asked questions
What wording should I put on my invoice for late payment interest?
State the due date, the rate, how interest accrues (simple, daily or monthly), and that collection costs are recoverable. A short four-line clause does more than a paragraph of legal language: most clients pay because the clause exists.
What is the standard late payment interest rate on invoices?
1.5% per month is the common US commercial standard, equivalent to 18% annually. State default rates range from 6% to 15% where no rate is agreed, so check your state's ceiling before writing a higher number in.
Should late payment interest be simple or compound?
Simple is the safer default. It is easy to explain and calculate, and rarely challenged. Compound is enforceable where the contract allows it, but it complicates disputes and looks punitive on small balances.
Does the clause have to be in the contract or can it be on the invoice?
The signed contract or terms are what make it enforceable in most US states. The invoice footer still sets expectations and speeds payment. Put the clause in the contract and repeat a short version on the invoice.
Can I charge late payment interest to UK clients without a clause?
Yes. UK suppliers have a statutory right to interest at 8% over the Bank of England base rate, plus £40 to £100 compensation per invoice, even with no clause. The wording helps, but the right is automatic.
Related: What Is a Reasonable Late Payment Interest Rate to Charge on Invoices? · Should Late Payment Interest Be Simple or Compound on Invoices? · Can You Charge Late Payment Interest Without a Contract Clause? · State Late Payment Interest Rates for Invoices: What You Can Legally Charge
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