Late Fee Chart for Contractor Invoices
The monthly rate you put in a contract, converted to the annual rate a state usury law is written against, and then the dollars on an invoice that is actually late.
A late fee is almost always written as a percent per month, and almost always read by everybody involved as if it were small. One and a half percent a month is eighteen percent a year, which is credit card territory and is the number a state cap is measured against.
The first table converts the rate. The second one says what it actually collects on an invoice sitting unpaid at thirty, sixty and ninety days.
Monthly rate to annual rate
| Per month | Per year | On $10,000, 30 days | Per day after that |
|---|---|---|---|
| 0.5% | 6% | $50.00 | $1.67 |
| 0.75% | 9% | $75.00 | $2.50 |
| 1% | 12% | $100.00 | $3.33 |
| 1.25% | 15% | $125.00 | $4.17 |
| 1.5% | 18% | $150.00 | $5.00 |
| 1.75% | 21% | $175.00 | $5.83 |
| 2% | 24% | $200.00 | $6.67 |
| 2.5% | 30% | $250.00 | $8.33 |
| 3% | 36% | $300.00 | $10.00 |
Interest by invoice size and days late
| Invoice | 30 days | 60 days | 90 days |
|---|---|---|---|
| $500 | $7.50 | $15.00 | $22.50 |
| $1,000 | $15.00 | $30.00 | $45.00 |
| $2,500 | $37.50 | $75.00 | $112.50 |
| $5,000 | $75.00 | $150.00 | $225.00 |
| $7,500 | $112.50 | $225.00 | $337.50 |
| $10,000 | $150.00 | $300.00 | $450.00 |
| $15,000 | $225.00 | $450.00 | $675.00 |
| $25,000 | $375.00 | $750.00 | $1,125.00 |
| $50,000 | $750.00 | $1,500.00 | $2,250.00 |
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The late fee calculator takes your own measurements and returns the number for your job, plus the material list as a printable document. Every cell in the table above came out of that same calculator, run at build time.
It only exists if it is in the contract
A late fee is a contract term, not a right. If the signed agreement does not state the rate, when it starts and what it applies to, there is nothing to collect and adding it to an invoice afterwards does not create it.
Write it into the payment terms with all three parts: the rate, the grace period, and the day the clock starts. Net 30 with 1.5 percent a month after that is a complete term. A line at the bottom of an invoice reading late fees may apply is not.
State caps are real and they vary
Usury limits and specific contractor payment laws set a ceiling on what may be charged, and it differs by state, by whether the customer is a consumer or a business, and sometimes by the type of work. A rate above the cap can be unenforceable, and in some places charging it invites a penalty of its own.
Prompt payment acts, which most states have, often set their own statutory interest rate for construction payments and sometimes allow attorney fees to the prevailing party. Check the rules for the state the work is in before printing a number on a contract.
What the fee is really for
It is not a revenue line. Very few contractors collect much late fee money, and the ones who do usually get it as part of a settlement rather than as a payment. What the term does is give the invoice a deadline with a consequence attached, which is what moves an account to the top of somebody's pile.
The stronger lever is usually the lien deadline rather than the interest. Preliminary notice and lien filing windows are short and unforgiving in most states, and missing one costs far more than any late fee would have collected.
Questions people ask
What is a normal late fee for a contractor invoice?
One to one and a half percent a month is the usual range in American construction, which is 12 to 18 percent a year. Anything higher should be checked against the state's usury cap first.
Is 1.5 percent a month legal?
In many states, for commercial work, yes, and it is a common contract term. Consumer contracts are more tightly limited in several states. It is a state law question and the answer changes with where the work is.
Can I add a late fee if it is not in the contract?
Generally no. The obligation to pay interest comes from the agreement. Some state prompt payment statutes supply a rate on their own for construction contracts, which is worth looking up, but the reliable route is to have written it into the terms.
Should I charge a flat fee or interest?
Interest is easier to defend because it is proportionate to the amount and the delay. A flat fee on a small invoice can work out to an enormous effective annual rate, which is exactly what a usury cap is written to stop.