Calculating Interest Owing
When you calculate the interest on an overdue invoice, the first step is to determine how many days past due the payment is.
If you receive your payment 20 days late, you can only charge interest for those 20 days.
The interest charge is $4.93 for the 20-day period.
Can you charge late fees on invoices?
Late Fees Are a Common Practice
If you’re not required to pay upfront for a service, then you’re given an invoice with a due date. Miss this date and you’re going to pay more than you had to if you paid on time. But it’s not the fee that’s important – it’s the sense of urgency it creates.
How are late interest rates calculated?
Late fees are usually assessed as a monthly finance charge. To calculate late fees, first decide on the annual interest rate you want to charge, then divide that by 12. Next, multiply that monthly rate by the amount due to arrive at the monthly late fee. Example: You have a 12 percent late fee on a $10,000 project.
Can you charge interest on interest?
Yes, credit card companies can and do charge interest on late fees. They will also charge interest on interest if a balance rolls over to another month. Any balance on your account can be subject to interest charges, and interest charges and late fees are part of that balance.