Late payment interest (or late payment penalties) is due as of the day after the due date, without the need for a reminder. Between businesses, the rate is set forth in the General Terms and Conditions. If no rate is specified, the rate is the European Central Bank’s rate plus 10 basis points. It cannot be less than three times the statutory interest rate.
Example
A €10,000 invoice is paid 30 days late. At an annual rate of 12%, the late payment penalties amount to 10,000 × 12% × 30 ÷ 365 ≈ 99 €, plus a flat-rate compensation of 40 €.
Why It’s Important
Penalties encourage timely payment and offset the cost of delays. Many companies do not enforce them: this is a negotiating tool that should be used tactfully.
Further reading: How to calculate and bill for late payments, Aston AI’s interest and penalties module, and the Excel kit for late payment penalties and interest.
See also: lump-sum compensation, unpaid invoice, contractual payment term.
