Getting paid late is one of the most draining parts of running a trade business. Late fees can help — both as a nudge to pay on time and as fair compensation for the hassle. But they only work if you set them up before the job, not after the invoice goes overdue. Here is how to do it properly.
The golden rule: agree it up front
A late fee is only enforceable if the customer agreed to it before the work started. That means it needs to be written into your quote, contract or terms of trade and accepted — not invented the day the invoice goes overdue. Get this bit right and everything else follows.
- State the payment term clearly (e.g. "payment due within 14 days").
- State what happens if it is late (e.g. "overdue accounts may incur interest of X% per annum, calculated daily").
- Have the customer accept the quote/terms before you start.
How much can you charge?
It has to be reasonable — genuine compensation for being kept out of your money, not a punishment. Two common approaches:
- Interest — a set annual rate (for example, around the RBA cash rate plus a margin) calculated daily on the outstanding amount.
- Flat admin fee — a modest fixed fee per overdue period to cover your chasing time.
Keep it fair. Penalty-style fees that look like a money-grab can be challenged and undermine your position if it ever goes to a dispute.
Use it as a nudge, not a weapon
The real power of a late fee is the deterrent. Customers who know a fee is coming tend to pay on time. When something does slip, a friendly reminder that the invoice is overdue — and that late fees may apply — usually gets you paid without you ever having to add one. Plenty of tradies waive the fee the moment the money lands, and everyone stays happy.
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Generates a polite, professional overdue-invoice reminder in seconds — firm enough to get you paid, friendly enough to keep the customer. Mention your late-fee terms without sounding like a debt collector.
Open the free toolWhen a fee is not enough
If a customer still will not pay, late fees are only step one. A calm, staged follow-up — reminder, firmer notice, then formal options — gets results far more often than losing your temper. The full playbook is in the guide below.
Frequently asked questions
Yes, provided the late fee or interest was agreed as part of your payment terms before the work — typically in your quote, contract or terms of trade. You cannot spring a brand-new penalty on a customer after the fact. If the term was disclosed and accepted, a reasonable late fee is generally enforceable.
It must be reasonable, not a punishment. Many tradies charge interest at a set annual rate (for example, around the RBA cash rate plus a margin) calculated daily, or a modest flat administration fee per overdue period. Excessive or penalty-style fees can be challenged, so keep it fair and clearly stated.
The fee needs to have been in your agreed terms up front. As a practical matter it is smart to remind the customer the invoice is overdue and that late fees may apply before you actually add them — it usually gets you paid without needing to, and keeps the relationship intact.
The biggest value is as a deterrent and a prompt — knowing a fee looms often gets people to pay on time. Many tradies waive the fee the moment payment lands. The clear terms and the follow-up matter more than the few dollars of interest.
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