GuideFeb 12, 2026
How to automate invoice reminders in Xero (2026 guide)
Step-by-step guide to setting up Xero's built-in reminders — and how to go beyond its limits with SMS, smart scheduling, and auto-stop.
Read articleMost small businesses never include late payment terms on their invoices. Not because they don't want to, but because they don't know what to write.
Here are 12 copy-paste late fee clauses you can add to your invoices and contracts today. Organized by type (percentage-based, flat fee, and payment terms) with guidance on when to use each one.
“I'm thinking about implementing a new client agreement contract and just including late fees as part of agreement.”
– Reddit user on r/freelance
“What is everyone's approach to late payments? Do you implement late fees? Is there a way to notify them without it sounding hostile or awkward?”
– Reddit user on r/freelance
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The most common approach. You charge a percentage of the outstanding balance for every month (or year) the invoice remains unpaid. Works well for invoices of all sizes.
A late payment fee of 1.5% per month (18% per annum) will be applied to all outstanding balances not received within [15/30] days of the invoice due date. Interest shall accrue from the first day after the due date until payment is received in full.
Overdue invoices shall bear interest at a rate of 10% per annum, calculated daily from the due date until the date of actual payment. Interest will be applied to the total outstanding balance including any previously accrued interest.
Late payment fees will be assessed on overdue balances as follows: - 1-30 days past due: 1.0% per month - 31-60 days past due: 1.5% per month - 61+ days past due: 2.0% per month Fees are calculated on the total outstanding balance from the original due date.
A late payment charge of 1.5% per month shall be applied to all amounts not paid within [15/30] days of the invoice due date. Interest shall compound monthly on the outstanding balance, including any previously accrued and unpaid interest charges.
Fixed dollar amounts instead of percentages. Easier for clients to understand and simpler to calculate. Best for smaller invoices or when you want a predictable, transparent structure.
A flat late payment fee of $25.00 will be applied to any invoice not paid in full within [15/30] days of the due date. This fee is in addition to the original invoice amount and is payable immediately upon assessment.
The following late fees will be added to invoices not paid by the due date: - 1-15 days late: $25.00 late fee - 16-30 days late: $50.00 late fee - 31-60 days late: $100.00 late fee - 61+ days late: $150.00 late fee plus referral to collections Fees are cumulative and added to the total balance owed.
Invoices overdue by more than 30 days may be subject to an administrative collections fee of $50.00 to cover the cost of additional follow-up and processing. This fee will be added to the outstanding balance and is non-refundable once assessed.
If services are suspended due to non-payment, a reinstatement fee of $75.00 will be charged in addition to all outstanding balances and any accrued late fees before services are resumed. Payment of the reinstatement fee and full outstanding balance must be received before service restoration.
These clauses go beyond fees. They define the full payment structure including due dates, discounts, deposits, and your right to pause work. Add these to your contracts and proposals, not just your invoices.
Payment terms: Net 30. Full payment is due within 30 days of the invoice date. A late payment fee of 1.5% per month will be applied to any balance remaining unpaid after the due date. All fees and interest will continue to accrue until the full balance, including late charges, is paid.
Payment terms: 2/10 Net 30. A 2% discount will be applied if payment is received within 10 days of the invoice date. Full payment is due within 30 days. Balances unpaid after 30 days will incur a late fee of 1.5% per month on the original invoice amount.
A non-refundable deposit of [25-50]% of the total project value is required before work commences. The remaining balance is due within [15/30] days of project completion or final invoice date. Late payment on the remaining balance will incur a fee of 1.5% per month from the due date.
In the event that any invoice remains unpaid for more than [30] days past the due date, [Your Company] reserves the right to suspend all ongoing services and deliverables without further notice until the outstanding balance, including any applicable late fees, is paid in full. [Your Company] shall not be liable for any losses or damages arising from such suspension.
Having the right wording is only half the battle. Where you place it and how you communicate it to clients matters just as much for enforceability.
Include late fee wording directly on the invoice itself -- not just in the contract. A footer or 'Payment Terms' section beneath the line items is the standard placement. If a client claims they didn't know, the invoice is your evidence.
Your service agreement or proposal should include the full late payment clause. The invoice can then say 'Subject to payment terms in our agreement dated [DATE]' for a cleaner look while maintaining legal backing.
Don't surprise clients. Mention your payment terms when onboarding, include them in your welcome email, and reference them in your first invoice. The goal is mutual understanding, not a gotcha.
Vague terms like 'late fees may apply' are hard to enforce. State the exact rate, when it starts accruing, and how it is calculated. Specificity protects you legally and sets clear expectations.
Late fee rates are regulated in many jurisdictions. US states have varying caps, the UK has the Late Payment of Commercial Debts Act, and the EU has the Late Payment Directive. Make sure your rate is compliant before including it.
Retain signed contracts, email confirmations, and copies of invoices that include your terms. If a dispute arises, you need to prove the client was informed of and agreed to the late fee policy.
Late payment interest rates are regulated differently depending on where you and your client are located. Here is general guidance so always verify with local regulations.
| Region | Typical range | Notes |
|---|---|---|
| United States | 1-2% per month | Varies by state. Some states cap at 1%, others allow up to 2%. Check your state usury laws. |
| United Kingdom | 8% + BoE base rate | Statutory rate for B2B under Late Payment of Commercial Debts Act 1998. |
| European Union | 8% + ECB reference rate | EU Late Payment Directive (2011/7/EU) for B2B transactions. |
| Australia | Up to 2% per month | No federal cap but must be 'reasonable.' Penalty interest rates apply in some states. |
| Canada | Up to 2% per month | Criminal interest rate cap of 60% per annum under the Criminal Code. Provincial rules vary. |
Need to calculate exactly how much a late fee adds up to? Use our late payment interest calculator to see the total amount owed based on your rate, invoice amount, and days overdue. You can also use our payment terms calculator to determine the exact due date for any payment terms.
Adding late fee wording to your invoices is step one. But if you never follow up when invoices go overdue, the clause is just decoration.
ChaseBot automatically applies and communicates late fees when invoices go overdue. It connects to your invoicing system, sends late payment reminders via email and SMS, and stops the moment your client pays. No spreadsheets. No awkward manual follow-ups.
Multi-step email and SMS sequences that fire based on invoice status.
Automatically calculate and communicate accrued late fees to clients.
Reminders cease the moment payment is received. No manual intervention.
You now have the wording. ChaseBot handles the enforcement: automated reminders, late fee calculations, and payment tracking. All on autopilot.
Try ChaseBot freeStep-by-step guide to setting up Xero's built-in reminders — and how to go beyond its limits with SMS, smart scheduling, and auto-stop.
Read articleLearn how to automate your AR process. Reduce DSO, eliminate manual follow-ups, and get paid faster. Step-by-step for small businesses.
Read articleComplete guide to Net 30, Net 60, 2/10 Net 30, and more. Learn what each term means, when to use it, and how it impacts your cash flow.
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