How to charge late fees on invoices: terms, software settings and wording

Step 1: put the late fee in your payment terms and on the invoice

To charge a late fee, put it in your payment terms before you send the invoice. Xero's US guide says to include payment terms on every invoice and in your contracts and, where those terms include late payment fees, to apply them after your grace period expires. InvoiceSherpa's guide gives the same order: state deadlines, accepted payment methods and any late fees in your contracts or invoices.

A terms line names the due date, the grace period, the fee as a dollar amount or a percentage, and whether it repeats. Example: Payment is due on the date shown. After the grace period in our agreement, the late fee in our agreement is added to the unpaid balance.

QuickBooks says there may be limits on the amount and type of fees you may charge, and Xero says to make sure fees comply with your state's regulations. Rules vary by state and by your contract or invoice terms.

Step 2: set QuickBooks Online to add late fees

QuickBooks Online adds late fees to overdue invoices on its own. Its help article, updated August 5, 2026, gives these steps:

1. Go to Settings and select Account and settings, then Sales.
2. In Late fees, select Edit and turn on the default charge applied to overdue invoices.
3. Enter the amount, the percent, or both.
4. Choose a grace period if you want one, then choose how often to charge.
5. Check that late fees are also turned on for each customer who should be charged.

QuickBooks starts from the day after you turn the setting on, adds fees for up to six months, and works the fee out on the invoice's due amount including sales tax, shipping and discounts. A customer can be given a different fee, grace period and schedule.

Step 3: or let a reminder tool apply a late fee schedule

A reminder tool can add the fee for you. InvoiceSherpa's late fee schedule sets the days past due when the fee starts, and a recurring schedule repeats it until the invoice is paid in full. Its four fee types include the higher of a dollar amount and a percentage, and both together. A fee can be generated on a newly created invoice, and late fees are listed on all three plans.

QuickBooks Online has automatic late fees too, so InvoiceSherpa vs QuickBooks compares the two on reminders and rules by customer. Paidnice lists late fees and interest on its Essentials plan, and Chaser lists late payment fees on Compact; best invoice reminder software for small business lists the tools.

Step 4: tell the client in the next reminder

QuickBooks says you need to turn on invoice reminders or send one by hand to tell a customer about late fees, and it does not email the invoice for you after a fee posts. So the first reminder after the fee should name it.

Example: As stated in our agreement, a late fee has been added to invoice 1042. The new balance and a pay link are below. The wording for the whole sequence is in overdue invoice reminder email.

Late fees, card surcharges and the vendors' own warnings

A late fee and a card surcharge are different charges. InvoiceSherpa's help says some U.S. states and Canadian provinces prohibit merchant processing surcharges, depending on the industry and the fee accounting method, and it has a setting to disable the credit card option in states where surcharges are illegal.

For late fees, QuickBooks tells you to confirm the requirements in your jurisdiction. Xero's guides place late fees in the payment terms, say they may affect customer relationships and note that Xero gives no legal advice; the Xero pages cited here describe no automatic late fee.

InvoiceSherpa's late fee settings are open during its 14-day free trial, which needs no credit card; at the end you pick a plan and enter card details.