It starts with your terms
A right to charge interest usually depends on clear, agreed terms of trade.
Guide
How to charge interest on overdue invoices
Charging interest on late payment can be a legitimate incentive to pay on time — if your terms are set up for it. Here's the general approach.
Charging interest on overdue commercial invoices is a common and legitimate practice, but the right to do it usually depends on your terms of trade. If your written terms clearly state that overdue accounts attract interest — at a specified rate and from a specified point — you are on far firmer ground than trying to impose it after the fact. Clear, agreed terms are what make a late-payment interest charge stick.
Set the rate at a level that genuinely encourages prompt payment without being punitive, state exactly when it starts to accrue and how it's calculated, and apply it consistently. Used well, interest is less about the revenue it raises and more about shifting the incentive so your invoice gets paid before the ones that carry no cost to delay. You can model the cost of late payment with our late-payment calculator or the interest calculator. This is general information, not legal or financial advice — have your terms of trade reviewed by a qualified adviser.
Getting it right
Interest that actually helps
Set a sensible rate
High enough to encourage prompt payment, not punitive.
Be clear on when
State exactly when interest accrues and how it's calculated.
Apply it consistently
Consistent application is what makes the charge credible.
Terms of trade doing their job?
Clear terms make interest — and recovery — far easier.
Common questions
Frequently asked questions
Can I charge interest on a late commercial invoice?
Generally yes, if your written terms of trade provide for it — stating the rate and when it accrues. Imposing interest without agreed terms is much harder to sustain.
What rate should I charge?
A rate high enough to genuinely encourage prompt payment without being punitive, applied consistently. Have your terms reviewed by a qualified adviser.
Does interest actually get invoices paid?
Its main value is shifting the incentive — your invoice, which now carries a cost to delay, gets paid ahead of those that don't.
Is this legal advice?
No — this is general information only. Have your terms of trade reviewed by a qualified adviser.
Get started
Late payers costing you?
See what it's costing with our late-payment calculator.