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Payment Terms
Late Payment Fee
Definition
A penalty charged when payment is not received by the due date.
Overview
Late payment fees compensate for the cost of delayed payment and encourage timely payments. They must be stated in your terms to be enforceable.
Example
A 1.5% monthly late fee on a $5,000 overdue invoice adds $75 per month until paid.
Best Practices
Include late fee policies in contracts and on invoices. Be consistent in enforcement.
Common Mistakes to Avoid
Not stating fees upfront
Fees too high (may be unenforceable)
Inconsistent enforcement
Frequently Asked Questions
How much can I charge for late fees?
Laws vary by location. 1-2% monthly is common. Check local regulations.