Late fee

A late fee only works if the client agreed to it before the work started. Put it in the contract or signed estimate, then repeat it on every invoice: how it’s calculated (a flat charge or a monthly percentage of the unpaid balance) and when it starts.

States limit how much interest and how large a fee you can charge, and the limits can differ for consumers and businesses. Some states’ prompt payment laws also set interest on late payments for certain projects. Check your state’s usury and consumer protection rules, or ask an attorney, before you pick a number.

Late fees mostly work as a nudge. Clients who see one on the invoice tend to pay on time; collecting the fee from a client who’s already behind is harder. Many contractors waive it once to keep a good client, but say so in writing so it doesn’t become the new normal.

It’s better still to make paying on time easy: clear due dates, a payment link, a reminder before the due date, and a deposit that keeps the final balance small.