Can I Charge a Late Fee on an Invoice?

A late fee is a charge you apply to unpaid invoices after the payment due date passes. It compensates you for the time value of money you are owed and incentivizes clients to pay on time. Late fees are legally enforceable in the US provided you disclosed the policy before the work began or at the time of invoicing. You cannot add a late fee after the fact without prior agreement. The most common late fee structures used by US freelancers and contractors are a percentage-based fee such as 1.5% per month on the outstanding balance which is 18% annually and approximates the cost of carrying a credit card balance, or a flat fee such as 25 dollars per 30 days for smaller invoices under 1000 dollars. Either structure is reasonable — the important thing is that it is stated clearly.

To make your late fee policy enforceable include it in every contract before work begins and reference it in the notes section of every invoice you send. Something like Invoices unpaid after 30 days are subject to a 1.5 percent monthly late fee is clear unambiguous and legally sound in most US jurisdictions. When a client is late apply the fee consistently. A fee you only sometimes charge loses its deterrent effect and signals to clients that your terms are negotiable.