A late fee on your invoices
If your client doesn’t pay your invoice by the due date, you can charge a late fee. This is a fixed one-off charge, usually around 1-2% of the invoice amount. There might be rules in your country about how much you can charge, and it might also depend on the invoice amount.
Another option is to charge interest. Interest on late payment starts running the day after the due date, but there are usually rules about when you can actually charge the interest, for example 10 days after the invoice was due.
Usually, you’d send a payment reminder before you charge your client extra fees. This will also help you maintain a good relationship with the customer. You should also make sure to put information about late payment fees or interest in your contracts and on your invoices.
Late fees are meant to incentivize the client to pay, they’re not meant to be a source of income for your business.
What to do if the client still doesn’t pay?
If the client still doesn’t pay the invoice, you can consider looking into debt collection: A debt collection agency can help you collect the money, for a small fee.
If the client has gone bankrupt—or you’ve tried debt collection and it didn’t work—you can write off the invoice as bad debt.
A late fee from the tax authorities
A late fee is an additional sum that the tax authorities can charge if you’re late doing required tasks such as filing taxes, submitting documents, paying consumption tax—VAT or GST—and so on.
Typically, you’ll get a warning before you’re charged late fees.
If you feel like the fee was charged for the wrong reasons, you can challenge the fee. You might be able to postpone the payment while the dispute is being resolved.