Definition
Late fees come in two main forms. A fixed late fee (for example 25 added once an invoice is more than 14 days overdue) is simple and predictable. A percentage-based late fee (for example 1.5 percent per month on the outstanding balance) compounds with the size and length of the delay.
Some jurisdictions allow statutory interest on overdue commercial invoices in addition to or instead of a contractual late fee — for example, the EU Late Payment Directive lets businesses charge a base interest rate plus a statutory margin. The right to charge usually depends on the terms being stated on the invoice.
Why it matters
A late-fee policy is mostly useful as a behavioural lever, not a revenue stream. Most businesses never actually collect the late fee — but stating it on the invoice gives you something to reference in reminder emails and signals that you take the deadline seriously.
Where this appears in your tools
Late-fee language is included in the invoice and reminder templates. The Late Payment Recovery Bot references late-fee policies in escalation emails when configured.