Late fees, payment terms and collecting overdue invoices in Canada

• Put a specific due date on the invoice, not just "Net 30"
• Agree the terms on the estimate, before the work starts
• State the late-fee rate in the same place, in plain language
• Make the payment instructions unmissable — one method, clearly written
• Send the invoice the day the work finishes, not at month end

A late fee is enforceable when the customer agreed to it in advance. That means it appears in your contract or on the accepted estimate, and it is repeated on the invoice — not added for the first time in a reminder email.

Keep the rate reasonable and state both the monthly and the equivalent annual rate. Terms expressed only as a monthly percentage can be unenforceable, and an aggressive rate is more likely to be challenged than paid.

1. Three days before the due date: a short, friendly reminder with the payment link
2. The day after: a factual notice that the invoice is now overdue
3. Day seven: a phone call — the fastest way to find out if something is genuinely wrong
4. Day fourteen: a formal notice referencing the agreed late-fee terms
5. Day thirty: escalate, or write it off deliberately rather than by neglect

Invoices roll to overdue automatically on their due date, in your business's own timezone, and reminders can go out on a schedule you control so you are not chasing manually. Each reminder is logged against the invoice, so you know exactly what was sent and when.

If an invoice is genuinely uncollectible, a write-off is recorded as a controlled correction with a reason, rather than deleted.

Can I charge interest on an overdue invoice?

You can charge interest if the customer agreed to it — in a contract, on the accepted estimate, or in terms shown on the invoice before the work started. Adding a late fee to an invoice after the fact is much harder to enforce.

Is there a maximum interest rate?

Interest terms are usually expressed as a monthly percentage. Rates must stay within the limits set by federal law, and terms expressed only as a monthly rate without an annual equivalent can be unenforceable. Keep rates modest and state the annual rate too.

What payment terms should I use?

Net 15 or Net 30 is standard. Shorter terms get paid faster on small jobs; longer terms are common with larger commercial customers. Whatever you pick, put a specific due date on the invoice rather than only the term.

Do I charge GST/HST on a late fee?

Interest and penalty charges for late payment are generally not consideration for a supply, so tax normally does not apply. Confirm with your accountant if late fees are a regular part of your billing.