Know the Figures

Late Payment Interest & Compensation

What a late invoice entitles you to claim, and what it is costing meanwhile.

Replaces: Solicitors’ letters and credit-control services

How to use it

Enter the unpaid invoice, how late it is, and the statutory rate in your jurisdiction. The calculator works out the interest that has accrued, adds any fixed compensation, and compares the total against what the missing cash has actually cost you.

Where the number comes from

  • The statutory rate is the reference rate plus the margin set by law — commonly eight percentage points in the UK and across the EU.
  • Daily interest is the invoice multiplied by that annual rate, divided by 365.
  • Interest accrued is the daily figure times the days overdue. Simple interest, not compound, which is the usual statutory basis.
  • Fixed compensation is a flat sum per invoice available in some regimes, added regardless of how late the payment is.
  • Your real cost applies your own cost of capital over the same period — what the money would have earned or saved if it had arrived on time.

What goes wrong

The part most calculators leave out.

  • The rules differ by jurisdiction and this is a generic model. The UK Late Payment of Commercial Debts legislation, the EU Late Payment Directive and US state prompt-payment rules all differ on the rate, the reference date, the fixed sums and who qualifies.
  • Fixed compensation is often tiered by invoice size rather than being a single figure, and in some regimes does not exist at all.
  • Which reference rate applies, and on what date it is fixed, is defined by statute rather than chosen. Many regimes fix it twice yearly rather than using the live rate.
  • Business-to-business and business-to-consumer debts are usually treated differently, and consumer protections frequently override contractual terms.
  • Contract terms may set a different rate. Depending on jurisdiction, a contractual rate can displace the statutory one — or be struck out as unfair if it is too low.
  • Simple interest is assumed. Some regimes allow compounding, which produces materially larger figures over long delays.
  • This is arithmetic, not legal advice. Whether you are entitled to claim, and how, is a question for a lawyer in your jurisdiction.

The claim that does not cover the damage

A 24,000 invoice is 74 days overdue. At a 4.75% reference rate plus the standard 8-point margin, the statutory rate is 12.75% and the invoice accrues 8.38 a day. After 74 days that is about 620 of interest, plus 100 of fixed compensation — roughly 720 claimable, or 3% of the invoice. But at an 11% cost of capital, being without that money for 74 days has cost the business about 535. The claim happens to exceed it here only because the statutory rate sits above the cost of capital. Drop the reference rate or raise the business's own funding cost and the position reverses quickly — which is why late payment is a cash flow problem to be prevented rather than a revenue line to be recovered.

Questions

Can I charge interest if my contract does not mention it?
In many jurisdictions yes — statutory late payment interest applies to commercial debts by operation of law rather than by agreement. The details vary, so confirm the position where you trade.
What is the usual statutory rate?
In the UK and across the EU it is commonly the reference rate plus eight percentage points. US rules are set state by state and by contract, and vary far more widely.
Should I actually claim it?
That is a commercial judgement. Many businesses calculate the entitlement and use it as leverage in a conversation rather than invoicing it, because the relationship is usually worth more than the interest. Knowing the number is what gives you the option.
Does interest compound?
Usually not under statute — most regimes specify simple interest. Some contracts and some jurisdictions allow compounding, which matters a great deal on debts outstanding for a year or more.
Does anything I type get sent anywhere?
No. The whole calculation runs in your browser. Nothing is transmitted, stored, or logged, and there is no account to create.

Last updated .

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