Methodology: Invoice Late Fee & Interest Calculator

1. Scope

Calculates late-payment penalties from invoice amount, grace period, a fixed fee, and an annual interest rate. US-centric defaults. Not legal advice — enforceable penalty rates are governed by state usury law and contract terms.

2. Inputs and outputs

Inputs

invoiceAmount number (currency)
dueDate date
paymentDate date
gracePeriodDays number default: 0
flatLateFee number (currency) default: 0
annualInterestRate percent default: 0

Outputs

daysLate

max(0, paymentDate − dueDate − gracePeriod).
interestAmount

invoice × (annualRate / 365) × daysLate.
totalOwed

invoice + flatFee + interest.

Engine source: src/lib/invoice-late-fee-interest-calculator/engine.ts

3. Formula / scoring logic

days_late   = max(0, date(paid) - date(due) - grace_days)
interest    = invoice * (annual_rate / 365) * days_late
total_owed  = invoice + flat_fee + interest

4. Assumptions

Simple-interest accrual daily. Compounding and payment-allocation rules (fee first or interest first) are contract-specific.
Banker's 365-day year, not 360 or 30/360.
No withholding or VAT logic — entered at gross.

5. Data sources

US Uniform Commercial Code — Article 2 (Sales), via Cornell Legal Information Institute as of 2024

6. Known limitations

State usury caps on permissible interest rates vary (5–24%+). Excess is unenforceable.
EU customers: EU Directive 2011/7 on combating late payment governs statutory interest (ECB reference rate + 8 pp). Use that as a benchmark for B2B EU invoices.

7. Reproducibility

Input
invoice = $5,000, daysLate = 30, flatFee = $25, annualRate = 12%.

Expected output
interest ≈ $49.32, total_owed ≈ $5,074.32.

8. Change log

2026-04-24 methodology page first published.