Late Payment Terms Template

Why this template matters

Charging interest on an overdue invoice feels fair, but you can only do it if two things are true: your terms expressly allow it, and the customer accepted those terms before the work began. A term the customer first sees on an invoice arriving after delivery is too late to rely on in any practical sense. The fix is to put clear, accepted terms in front of them up front.

Well-drafted terms do more than enable interest. They state the due date, the payment method, what happens if payment is late, and who bears recovery costs — so the whole relationship has rules both sides agreed to. When you later need to escalate, you are enforcing an agreement, not improvising a penalty.

The template

PAYMENT TERMS

1. Payment is due within 14 days of the invoice date
   (the 'due date'), unless otherwise agreed in writing.

2. Payment is to be made by EFT to the account shown on
   the invoice, quoting the invoice number as reference.

3. Overdue amounts may incur interest at [X]% per annum,
   calculated daily from the due date until paid in full.

4. Where an account is overdue, the customer is liable for
   reasonable costs of recovery, including collection and
   legal costs incurred in recovering the amount owing.

5. Goods/services remain subject to these terms, which the
   customer accepts on acceptance of the quote or order.

6. Any dispute must be raised in writing within 7 days of
   the invoice date; otherwise the invoice is deemed correct.

How to use it

Adapt the bracketed figures to your business and, crucially, put these terms where the customer accepts them — on the quote, the credit application, or an order confirmation signed before work starts. Then repeat the key points on every invoice so they are reinforced, not introduced. The interest clause and the recovery-costs clause are only worth anything if the customer agreed to them in advance.

Be realistic about the interest rate. Before you set a figure, model what it actually recovers on a typical overdue balance — a rate that looks tough but collects little may not be worth the friction. State a due date as a real date on the invoice itself, and keep the wording identical across quote and invoice so there is no daylight for a customer to argue through.

Making the terms enforceable in practice

Enforceability rests on acceptance and consistency. Keep evidence that the customer agreed — a signed quote, an emailed approval that references your terms, a returned credit application. If you ever need to claim interest or costs, that acceptance is what you point to. Terms buried in fine print the customer never saw are far weaker than terms they actively agreed to.

This is general business information, not legal advice. The recoverability of interest and collection costs can depend on your contract and the circumstances, and rules vary, so for significant debts or contested claims consider getting legal advice on your specific terms. Used consistently, though, clear accepted terms are the foundation that makes every later collection step credible.