Read by Denym Bird6 min
Summary
Yes, in association: businesses that start charging late fees get about 3 more invoices in every 100 paid on time than similar businesses that do not, in Paidnice's analysis of invoice data from over 1,000 customers. 68% of them improve, against 52% of the comparison group. Our view: apply the fee automatically and waive it deliberately.
- Fee type: 81% of fixed late fees are paid, against 57% of percentage fees.
- Paid or waived: 62% of late fee invoices are paid and 24% are waived, and the typical paid fee is A$37 in Australia, £29 in the UK and US$41 in the US.
- When fees are paid: 92% of paid late fees are paid on the same day as another invoice from the same customer.
- The fix: Paidnice applies the fee as an invoice in Xero or QuickBooks Online after a grace period you set, and lets you waive it when a good customer slips once.
A customer is 20 days late again. Your terms have a late fee clause, and you have never charged it. You open the invoice and wonder whether a fee would get you paid sooner or cost you the customer.
In the video: Do late fees make customers pay on time? (0:32), how big is a typical late fee? (1:38), are late fees paid or waived? (2:46), fixed or percentage? (3:41), what to do (4:22).
Here is what the invoice data says about businesses that made that call, which fee designs get paid, and when the fee actually lands.
Do late fees make customers pay on time?
Businesses that start charging late fees get about 3 more invoices in every 100 paid on time than similar businesses that do not, in our analysis of invoice data from over 1,000 Paidnice customers.
On this page, Paidnice customers are the businesses that use Paidnice. The people who owe them money are payers.
The comparison is before-and-after against matched businesses that never charged a fee. Businesses chose to start fees, so treat the gain as a strong association. The comparison is not a controlled test.
Our view is that a late fee gives a payer a reason to pay your invoice first. The data shows the gain as an association. The wider picture of what moves payment is in our credit control statistics.
Free: Late payment interest calculatorWork out the interest or fee on an overdue invoice.How many businesses improve after starting late fees?
68% of businesses that start late fees improve their on-time payment, against 52% of the comparison group, in Paidnice data.
68% of businesses that start late fees improve, against 52% of similar businesses without them
Share of businesses whose on-time payment rose, before-and-after against matched businesses.
- Started late fees68%
- Similar businesses, no late fees52%
Source: our analysis of invoice data from over 1,000 Paidnice customers.
Fee businesses paid slower beforehand than the comparison group, so some adopt fees after a bad patch. The gain above is measured against that slower starting point.
Does the size of the business change the result?
The gain from starting late fees is about the same for small, mid-size and large businesses, grouped by how many invoices each sends a month, in Paidnice data: about 3 more invoices in every 100 paid on time.
We measure each business’s own on-time rate, so a business with many invoices counts the same as one with few. If you run a small business, the gain in the data is about the same as for a large one.
Do late fees work in Australia and the UK?
Starting late fees is followed by a gain in both: about 6 more invoices in every 100 paid on time in Australia and about 2 more in the UK, in Paidnice data.
Late fees are followed by the biggest gain in Australia and the smallest in the UK
Extra invoices paid on time in every 100 after starting late fees, against matched businesses without them.
- AustraliaAbout 6 in 100
- All marketsAbout 3 in 100
- United KingdomAbout 2 in 100
Source: our analysis of invoice data from over 1,000 Paidnice customers.
The UK gain is smaller. UK businesses can also charge interest at 8% plus the Bank of England base rate on business-to-business invoices. The detail is in our guide to late payment fees in the UK.
Do customers pay fixed fees or percentage fees more often?
81% of fixed late fees are paid, against 57% of percentage fees, in our analysis of invoice data from over 1,000 Paidnice customers.
The fee-type comparison looks at different businesses at the same moment, so businesses that pick fixed fees may differ from those that pick percentages.
Fixed late fees are paid 81% of the time, percentage fees 57%
Share of late fee invoices that were paid, by how the fee is calculated.
- Fixed fee81%
- Percentage fee57%
Source: our analysis of invoice data from over 1,000 Paidnice customers.
If you are choosing an amount, our guide to how much you can charge for late fees covers the limits by country and state.
How much is a typical late fee?
The typical late fee is about 3% of the business’s typical invoice total, in Paidnice data, and about 2% in the UK. That is the size of one fee charge on one overdue invoice. It is not a monthly or yearly rate. The figure includes fees that were later voided, and paid fees are in the next section.
6 in 10 payers who are charged a fee are charged again, so one slow payer can collect several charges. About 3 in 10 invoices that get a late fee get a second one. In the UK and Australia, the second fee usually comes a week later.
The UK figure looks low next to the law. In Paidnice data, nearly half of UK late fees (46 in 100) are interest charged at a yearly rate. Each of those charges is small: the typical one is £2.76, about 0.4% of the invoice it is charged on. UK statutory interest is 8% a year above the Bank of England base rate, so one month of it is roughly a twelfth of that yearly rate.
Very few UK late fees are the statutory fixed sums. Only about 4 in 100 are £40, £70 or £100, and the typical paid UK fee in our data is £29, below the smallest fixed sum.
Fees land on the same repeat late payers. Who those payers are is in our post on late-paying customers and their warning signs.
Are late fees paid or waived?
62% of late fee invoices are paid and 24% are waived, in our analysis of invoice data from over 1,000 Paidnice customers. The rest were still open.
The median paid late fee is A$37 in Australia, £29 in the UK and US$41 in the US. These medians cover paid fees only.
62% of late fee invoices are paid and 24% are waived
Share of late fee invoices by outcome.
- Paid
- Waived
Source: our analysis of invoice data from over 1,000 Paidnice customers.
Apply fees automatically so every late payer gets the same reason to pay. Waive deliberately, so you choose which good customer gets let off, and when. When and how to do that is in waiving late payment fees.
When do customers pay a late fee?
92% of paid late fees are paid on the same day as another invoice from the same customer, in Paidnice data.
Payers usually settle the fee on the same day as another invoice from the same customer. Paidnice applies the fee as an invoice in Xero or QuickBooks Online because only an invoice reaches the payer’s accounts payable system and their payment run.
How do you set up late fees in Paidnice?
Paidnice applies the fee as an invoice in Xero or QuickBooks Online after a grace period you set, as the fixed amount that is paid 81% of the time, a percentage, or interest per year. Any fee can be waived or voided inside Paidnice.
- Pick the fee type. Fixed fees are paid 81% of the time against 57% for percentage fees (a comparison across different businesses), so fixed is a sensible first choice unless your terms say otherwise. Fee wording for your terms is in late fee policy wording examples.
- Set a grace period in days, so a payer who is a day late is not charged.
- Name the fee in your reminders. A reminder can carry the forecast penalty, so the payer sees the amount before it applies. Which reminders to send first is in how many payment reminders it takes to get paid.
- Run different fee policies for different customers with groups and policies: good payers get statements and a due date reminder, repeat late payers get the fee.
- UK businesses can charge statement interest at the Bank of England base rate plus your percentage.
- Waive deliberately. A rule can waive the fee when the invoice is paid within 3 days of it being applied, and any fee can be voided inside Paidnice.
Late fee results from Paidnice invoice data at a glance
Every figure on this page, in one table.
| Measure | Result |
|---|---|
| Extra invoices paid on time after starting late fees | About 3 in 100 overall, about 6 in 100 in Australia, about 2 in 100 in the UK |
| Businesses that improve | 68%, against 52% of similar businesses without late fees |
| Late fees that are paid | 81% of fixed fees, 57% of percentage fees |
| Late fee invoices paid or waived | 62% paid, 24% waived |
| Typical paid fee | A$37 in Australia, £29 in the UK, US$41 in the US |
| Paid fees settled on the same day as another invoice | 92% |
Source: our analysis of invoice data from over 1,000 Paidnice customers.
Late fees are optional. You can run reminders and statements alone and add a fee later for the customers who need the extra reason. Xero users can follow how to add late payment fees in Xero, or see the late fees and interest feature. Book a demo and we will set the policy up with you.
How we measured late fees
We measured late fees on credit invoices, with payment checked 75 days after the due date, across invoice data from over 1,000 Paidnice customers.
- Base: credit invoices: payment terms of 1 day or more, not paid on or before the issue date. Fee invoices themselves are excluded from the payment outcomes.
- Outcome: paid on time, and paid or unpaid 75 days after the due date.
- Before-and-after comparison: each business's on-time rate in the months before its first fee invoice against the months after, measured against matched businesses in the same region and size band (invoices sent per month) that never charged a fee. Businesses chose to start fees, so the 3 in 100 gain is an association rather than a controlled test.
- Who starts fees: fee businesses paid slower beforehand than the comparison group, so some adopt fees after a bad patch.
- Fee design: the fixed-against-percentage figure (81% against 57%) compares different businesses at the same moment, so businesses that pick fixed fees may differ from those that pick percentages.
- UK fee types and repeats: fee type comes from each late fee policy (fixed amount, percentage of the invoice, or interest charged at a yearly rate), for fees issued January 2025 to July 2026. The £2.76 and 0.4% figures are a share of the invoice the fee was charged on, a different base from the "typical invoice" figure. Repeat fees count invoices with 2 or more fee charges.
- Fee size: the paid-fee medians (A$37, £29, US$41) cover paid fees only. The "about 3% of the typical invoice" figure includes voided fees, so always read the two separately.
- Same-day payment: the 92% figure counts a paid fee as same-day when any other invoice from the same payer was paid on that date.
FAQ
Do late fees work?
Yes, in association: about 3 more invoices in every 100 are paid on time after businesses start charging late fees, and 68% of them improve.
Can you charge a late payment fee on invoices?
Yes in most cases, if your terms say so and the payer agreed to them before the work. Rules differ by country and state, so check yours. State the fee, the grace period and how it is calculated on the invoice and in your terms. Wording is in our late fee policy wording examples.
How much should I charge for a late payment fee?
One typical late fee charge across Paidnice customers is about 3% of the business’s typical invoice total, and fixed fees are paid 81% of the time against 57% for percentage fees. Limits by country and state are in how much you can charge for late fees.
Are late payment fees legal in the UK?
Yes, late payment fees are legal in the UK for business-to-business invoices. UK law allows statutory interest at 8% plus the Bank of England base rate and a fixed recovery sum of £40, £70 or £100 per invoice, or the fee set in your contract. See late payment fees in the UK.
Can I charge interest on an overdue invoice?
Yes, as a percentage per year calculated for the number of days late, if your terms allow it or statute provides it. Paidnice can charge it per invoice or on a customer’s whole overdue balance through a monthly statement interest charge.
How do I calculate a 1.5% late fee on an invoice?
Multiply the overdue amount by 0.015: if 1.5% is charged per month, a $2,000 invoice carries a $30 fee for each month late. In the data, percentage fees are paid 57% of the time against 81% for fixed fees, so consider a fixed amount instead. The full calculator is in how much you can charge for late fees.
About the editorial team
Denym started Paidnice in 2022 after customers paying late left his own business short on payroll. He has led it to $1 billion collected on time across more than 1 million invoices, and writes about credit control, late fees and getting paid on Xero and QuickBooks.
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