Can an agency charge interest on late invoices? What four state statutes say, and why the contract comes first

What four statutes say when the contract is silent

The four texts below are quoted from the statute itself. They are not interchangeable: two speak about what a creditor may charge or what an obligation bears, and two speak about interest a court awards or a judgment carries.

• Texas — Finance Code §302.002: “the creditor may charge and receive from the obligor legal interest at the rate of six percent a year on the principal amount of the credit extended beginning on the 30th day after the date on which the amount is due.” The same section adds that if the obligor agreed to pay compensation that constitutes interest, the obligor is considered to have agreed on the rate it produces, whether or not that rate is stated.
• California — Civil Code §3289(b): “If a contract entered into after January 1, 1986, does not stipulate a legal rate of interest, the obligation shall bear interest at a rate of 10 percent per annum after a breach.”
• New York — Civil Practice Law and Rules §5001(a): “Interest shall be recovered upon a sum awarded because of a breach of performance of a contract…”, and §5004(a): “Interest shall be at the rate of nine per centum per annum, except where otherwise provided by statute”. The same subsection sets two percent a year in actions arising out of a consumer debt where a natural person is the defendant.
• Florida — Statutes §55.03(1): the Chief Financial Officer sets the rate of interest payable on judgments each quarter, by averaging the discount rate of the Federal Reserve Bank of New York for the preceding 12 months and adding 400 basis points. The same subsection preserves any rate established by written contract or obligation.

Read side by side, the differences matter. The Texas text lets the creditor charge, and it starts on the 30th day after the due date, not the first. The California text attaches to the obligation after a breach. The New York text works through a sum a court awards. The Florida text sets the rate a judgment carries, and leaves contract rates alone. Which of these applies to a particular invoice, from what date and by what procedure, depends on the contract and the facts. Ask the firm’s attorney before an invoice, a reminder or a demand letter mentions any of them.

Can I charge late fees on invoices, and how much?

Yes, when the client agreed to the fee before the work, but how much is a matter of state law, and the answer can differ for a business client and a household. There is no single national cap. A flat late fee and a monthly percentage on the unpaid balance are different terms, and state law can treat them differently. Not legal advice.

For a cleaning, plumbing or HVAC company that serves both property managers and homeowners, the same fee can be allowed on one account and capped or void on the other. Set it with the company’s attorney for each state and each type of client, write it into the service agreement or work authorization before the first job, and print it on every invoice. On a homeowner call where the tech collects before leaving, there is no overdue invoice for a fee to attach to.

Four more texts show how far apart the rules sit, and how much turns on who the client is.

• Georgia — Code §7-4-16: “The owner of a commercial account may charge interest on that portion of a commercial account which has been due and payable for 30 days or more at a rate not in excess of 1 1/2 percent per month calculated on the amount owed from the date upon which it became due and payable until paid.” Unless otherwise provided in writing signed by the obligor, the account is due on the date a statement is rendered. As the Georgia Court of Appeals quoted it in 2018, the statute defines a commercial account as an obligation arising out of a sale or furnishing of “goods or services,” and excludes retail installment transactions; whether a given household account fits is a question for an attorney.
• California — Civil Code §1671(b): a contract term that sets the damages for a breach in advance “is valid unless the party seeking to invalidate the provision establishes that the provision was unreasonable under the circumstances existing at the time the contract was made.” Where the client bought services primarily for personal, family or household purposes, §1671(d) applies instead, and such a term is void unless actual damage would be “impracticable or extremely difficult to fix.” Whether a given late fee is that kind of term is a question for an attorney.
• Wisconsin — the Department of Financial Institutions explains that late payment charges on purchases for individual, family or household purposes fall under Wis. Stat. s. 138.05(3), that the merchant must contract for the charge, with a notice or a signed agreement when the relationship is established, and that “The maximum rate is 1% per month, or 12% per year.”
• Federal — once a household account goes to a collection agency, 15 U.S.C. §1692f(1) bars the collector from collecting any amount, “including any interest, fee, charge, or expense incidental to the principal obligation,” unless it is “expressly authorized by the agreement creating the debt or permitted by law.”

What the interest is actually worth on one invoice

Interest on a late invoice is simple arithmetic: the amount, times the annual rate, times the days, divided by 365. Running it once on a real-sized invoice puts the question in proportion.

Illustrative example: a consulting firm’s $40,000 milestone invoice is paid 60 days after its due date. At six percent a year for all 60 days, the interest is about $395. Under the Texas text, which starts on the 30th day after the due date, roughly 30 days count, so about $197. At ten percent a year for 60 days, about $658. Set against the firm’s own position — two payrolls met while the $40,000 sat with the client — the interest is small. The figures are hypothetical; the formula is the check.

That proportion is the reason a stated late-payment clause earns its place in the MSA even when nobody intends to collect much interest. It sets an expectation before the work starts, gives the follow-up note a term to point to, and leaves room for a named person to waive it deliberately for a good client in a hard month. What the clause cannot do is schedule the follow-up, notice that an invoice is past terms, or fix an invoice that was never accepted in the client’s system. In the example above, the larger cost is the waiting itself, which is the same whether or not interest is ever charged.

The count: invoices past terms, and the clause behind each one

Before deciding anything about interest, count. Take every invoice that was paid after its due date last quarter, or is still open past it, and give each one a row.

• Client, invoice number, amount, invoice date and due date under the agreement.
• Days past due when paid, or days past due today.
• Whether the client’s MSA or SOW has a late-payment clause, and the rate and start date it states.
• The governing-law state named in the agreement.
• Whether the invoice itself states the terms and any late-payment rate.
• Follow-up dates: when the first reminder went out, who sent it, and what the client said.
• Whether the invoice was rejected or returned by the client’s AP team or portal before it was accepted.

Sorted by client, the table answers the questions an owner needs before calling an attorney. Which clients run past terms every quarter, and how far. How many agreements carry a late-payment clause at all. How many late invoices had no reminder until a cash squeeze. And how many “late” invoices were really invoices rejected in a client’s AP portal, where the client’s clock may have started only when a corrected invoice was accepted. Each of those has a different fix, and only one of them involves interest.

Putting the clause in before the work

The operational change is small and happens once per client. The firm’s attorney reviews a late-payment clause for the MSA template and for each state the firm’s clients name as governing law. New agreements carry it from signature. Existing clients see it at renewal, with a sentence explaining it, rather than on a past-due invoice. Every invoice states its due date and the agreed terms on its face.

Then the follow-up gets a calendar. A reminder a few days before the due date, a note on the day after, a call at fourteen days past terms, and a named decision at thirty: pause new work, invoke the clause, or waive it in writing. The decision belongs to one person — the principal or the finance lead — not to whichever account lead feels most awkward about it. Federal work runs on its own rules: under 5 CFR 1315.4(i), when a federal agency pays after the due date, interest is paid automatically under the Prompt Payment rules, and the payment period begins on receipt of a proper invoice.

Ask the firm’s attorney: which state’s law governs each client agreement, what rate and start date the clause may state there, whether a flat late fee is treated differently from interest, and how a waiver should be written so it does not change the agreement for later invoices.

When not to hire anyone for this

A firm whose invoices are paid close to terms, whose agreements already carry a reviewed late-payment clause and whose follow-up runs on a calendar does not need outside help here. The table above, built once, will say so in an afternoon. If a single client is the problem, the answer is a conversation with that client and possibly the attorney, not a project.

It is worth a second look when the table shows invoices past terms across several clients with no reminders on record, when agreements carry no late-payment terms at all, or when late payment sits next to other leaks: retainer hours past their allowance, extra rounds absorbed on fixed-fee work, invoices bounced by client portals. The page on agency operations consulting lays out where those sit in a marketing, PR or consulting firm. The Revenue Review is a fixed $4,500, two weeks, read-only engagement: we read the firm’s own invoice, payment and agreement records, measure the days each client adds, and put a monthly dollar figure on each leak, with a written report and a 90-day plan. Legal questions stay with the firm’s attorney. The free Cash Gap Calculator shows first what the days to pay cost, and a free 20-minute call is enough to tell whether a Review fits.