Invoice Late Fees and Interest in Canada
Guide • Canada • last updated October 2026
What you can legally charge for late invoices in Canada, how to calculate a fee or interest, and how to word it on your invoice.
A fair, clearly stated late fee is one of the best tools for getting paid on time. This guide covers what you can charge in Canada, the difference between a fee and interest, how to calculate it, and how to word it. Use the late fee and interest calculators.
What you can charge in Canada
You can charge a late fee or interest if it is agreed in your terms before the work, and if it is reasonable. There is no single national cap for commercial late fees, but the amount should be fair and disclosed. Put it in your contract and on the invoice.
Flat fee vs interest
A flat fee is a fixed charge for paying late. Interest accrues over time, often stated as a monthly or annual percentage. Interest scales with how late the payment is, which is fairer on large invoices.
How to calculate it
For a flat fee, add the set amount. For interest, multiply the overdue amount by the annual rate and by the days overdue divided by 365. The interest calculator does this instantly.
How to word it on the invoice
State it plainly, for example: a late fee of 2% per month applies to balances not paid by the due date. Repeat the same wording in your agreement so it is enforceable.
A worked example
A $2,500 invoice is 30 days late at 18% annual interest. The interest is about $37. A 2% flat monthly fee would instead be $50. Either way, the client has a reason to pay on time.
Making a late fee enforceable
A late fee only holds up if the client agreed to it before the work. Put it in your written terms and repeat the same wording on every invoice. Keep it reasonable; an excessive charge can be challenged and damages the relationship. The goal is to encourage on-time payment, not to profit from lateness.
Flat fee or interest: which to use
A flat fee is simple and works well on smaller invoices. Interest, stated as a monthly or annual rate, scales with the size of the bill and how late it is, which is fairer on larger amounts. Some businesses use a flat fee after a grace period, then interest if it runs long.
Calculating and applying it
For interest, multiply the overdue amount by the annual rate and by the days late over 365. Apply the fee on an updated invoice that shows the original amount, the fee, and the new total, so the client sees exactly how it was calculated. Consistency matters: apply your policy the same way to every client.
Late-fee policy checklist
- Agreed in writing before the work.
- Stated on every invoice in the same words.
- Reasonable and applied consistently.
- Shown clearly on the updated invoice.
Using late fees as a deterrent, not a revenue stream
The point of a late fee is to change behaviour, not to earn money. Clients who know a fee is real and will be applied consistently simply pay on time, which is the outcome you actually want. Keep the fee fair and foreseeable, apply it the same way to everyone, and be willing to waive it once for a good client who slips, while making clear it stands going forward.
Disclose it before the work and repeat it on every invoice, so when you do apply it, there is no argument, only a prompt payment.
Late-fee checklist
- Agreed in writing before the work.
- Shown on every invoice.
- Applied consistently and fairly.
- Calculated clearly on the updated invoice.
Frequently asked questions
How much can I charge for a late payment fee in Canada?
There is no single national cap for commercial late fees, but the fee must be reasonable and agreed in your terms before the work. A common approach is a flat fee or interest of around 1% to 2% per month on the overdue balance. Disclose it on the invoice and in your contract.
How do I calculate interest on an overdue invoice?
Multiply the overdue amount by the annual interest rate, then by the number of days late divided by 365. For example, $2,000 at 18% for 30 days is about $30. The late payment interest calculator does this instantly.
Is it legal to charge interest on unpaid invoices?
Yes, as long as the interest was agreed in advance in your terms and is reasonable. State the rate clearly on the invoice and in your agreement so it is enforceable, and apply it consistently to all clients.