What is a late payment fee

A late payment fee is a charge applied to a customer if a reminder or collection notice needs to be issued for an outstanding bill.

If a customer fails to make a timely payment, it is customary to dispatch a payment reminder, including a late payment fee, approximately 30 days after the invoice’s due date. This gives a gentle nudge to remind the customer of the outstanding payment. The reminder fee covers the expenses associated with follow-up activities, such as issuing reminders and reissuing invoices.

It is important to note that it is customary to send an initial reminder without any potential fees before considering subsequent reminders with charges. This goodwill gesture helps maintain a strong relationship and is often the final courtesy before implementing fees.

How much can you charge for a reminder fee? 

A reasonable fixed penalty late fee or interest capped at around 10% annually (equated to a monthly figure) can be imposed in Australia. It is crucial to understand that late fees are designed to incentivize timely payments rather than serve as a source of profit for the business.

For balances below AUD $1000, it is generally not advisable to levy interest; instead, a fixed late fee ranging from AUD $20 to $50 per invoice is common. For balances of AUD $1000