When can I charge late fees on invoices?

Most businesses add a short grace period (3–5 days) after the due date. Whatever you choose, state it clearly in your payment terms so customers know what to expect.

Keep fees reasonable. A flat fee or interest on the overdue balance is common, but it should reflect your real costs—not be a penalty. Some states limit late fees or interest, so check local rules before setting your policy. Additionally, a court may not enforce unreasonably high or punitive fees.

Clear, transparent terms protect your cash flow and your customer relationships.

What to consider in your specific situation

While these general guidelines apply to most businesses, your best approach may depend on several factors:

• The wording of your contracts or invoices.
• Any applicable state or local laws on interest or late fees.
• The type of customer or service agreement involved.
• How your business handles grace periods or payment terms.
• The impact of late payments on your cash flow or operations.

Since every business is different, consider using Rocket Copilot or connecting with a Legal Pro to get more information about how late fee rules may apply to your business.