How to Calculate Late Payment Fees on Invoices
Late payment fees are calculated as a percentage of the overdue invoice amount plus statutory interest. Under the EU Late Payment Directive, businesses can charge at least 0.8% per month (the ECB rate plus 8 percentage points) on commercial transactions, plus a fixed compensation of 40 EUR or more for recovery costs. Many businesses set their own terms in the contract — for example 1.5% per month — as long as they are clearly agreed before the transaction.
The EU default applies automatically to B2B transactions even if your invoice does not mention it: 30 days after the invoice date (or receipt of goods), interest accrues at the statutory rate, and a fixed compensation of at least 40 EUR is owed for each overdue invoice. You can agree to longer payment terms in a contract, but the statutory interest kicks in once those terms are breached. An AI employee like Nika does not calculate or charge late fees — that is a collection decision — but she does ensure every invoice is entered and filed the same day, from $0.40 per processed invoice, so you know exactly what is outstanding.
To set your own terms, state the payment deadline, the late fee rate, and the interest in your contract or invoice terms before the transaction. Common structures are a flat late fee (e.g. 25 EUR per overdue invoice), a monthly percentage (1–2%), or both. Check your local jurisdiction: some countries cap the maximum rate, and consumer transactions have different rules than commercial ones. Your accountant or legal adviser confirms what applies.
Related questions
What is the statutory late payment interest rate in the EU?
Under the EU Late Payment Directive, the statutory rate for commercial transactions is the European Central Bank rate plus 8 percentage points, with a minimum of 0.8% per month. This applies automatically once payment terms are breached — you do not need to have stated it on the invoice.
Can I charge a fixed fee for each overdue invoice?
Yes. Under the EU directive, you can claim a fixed compensation of at least 40 EUR for recovery costs on each overdue commercial invoice, plus the statutory interest. Many businesses set higher amounts in their contracts, subject to local caps on maximum charges.