Accountants Late Payment Interest (Monthly) Calculator
Estimate monthly late payment interest on an overdue accountancy invoice and see the total amount due.
Overview
Use this calculator to estimate monthly late payment interest on an unpaid accountancy invoice. Enter the outstanding balance, the monthly interest rate in the payment terms, and the number of full months overdue to see the estimated interest and total balance due.
How it works
The calculator first converts the monthly percentage rate into a cash amount by multiplying it by the overdue invoice balance. It then multiplies that monthly interest amount by the number of full months overdue. This uses simple interest, meaning interest is not added to the balance for later months. The original overdue amount and estimated interest are then added together.
How to use this calculator
- 1Enter the unpaid invoice balance.
- 2Add the monthly late payment interest rate from the relevant payment terms.
- 3Enter the number of full months the invoice is overdue.
- 4Review the estimated interest and total amount due.
- 5Check the contract and applicable rules before issuing a demand or statement.
Example Calculation
Overdue invoice amount
$10,000
Monthly interest rate
2%
Months overdue
3
Estimated late payment interest
$450.00
At 1.5% per month, the interest is £150.00 per month. Over 3 full months, estimated interest is £450.00 and the estimated total due is £10,450.00.
Frequently asked questions
How is monthly late payment interest calculated?
This calculator multiplies the overdue balance by the monthly interest rate, then multiplies that amount by the number of full months overdue. This is a simple-interest calculation.
Does this calculator compound late payment interest?
No. It assumes simple interest on the original overdue balance. If your terms allow monthly compounding, the amount may be different.
What monthly interest rate should I enter?
Use the rate stated in the signed engagement terms, contract, invoice, or other applicable payment terms. Rates may also be affected by local late-payment rules.
Can I include fixed late payment charges or debt recovery costs?
No. This calculator estimates interest only. Add any fixed compensation, collection costs, or other permitted charges separately after checking whether they apply.
Does the calculation include partial months?
No. It uses full months only. If interest is calculated daily under your terms or local rules, a daily-interest calculation may be more appropriate.
Should VAT be charged on late payment interest?
VAT treatment can depend on the transaction and jurisdiction. Check the relevant VAT guidance or seek advice for your specific circumstances.
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Assumptions and warnings
Assumptions
- The calculation uses simple interest, with the same original overdue balance used for every month.
- Interest is applied for full months only; partial months and daily calculations are not included.
- The monthly rate entered is taken from the relevant contract, engagement letter, invoice terms, or applicable rules.
- The estimate excludes fixed compensation, recovery costs, VAT treatment, payments made during the period, and other charges.
- Results are estimates and may differ from the amount contractually or legally payable.
Warnings
- This calculator provides an estimate only and is not legal, financial, or accounting advice.
- Late payment interest rights, rates, and recovery charges can depend on the contract, jurisdiction, customer type, and current law.