Late payment interest is interest a supplier can claim when a business or public-sector customer pays an invoice after its due date. In the EU, the Late Payment Directive (2011/7/EU) gives the creditor this right without having to send a reminder, provided it has met its own obligations (Article 3(1)). The statutory rate is simple interest of at least eight percentage points above a reference rate, which for euro countries is based on the European Central Bank's main refinancing rate (Article 2), and the creditor is also entitled to a fixed minimum of €40 for recovery costs (Article 6). Where no payment date was agreed, interest generally runs from 30 days after the customer receives the invoice (Article 3(3)). On the invoice, state your terms next to the due date. Example (assuming a 2% reference rate, so at least 10% a year): €1,000 paid 73 days late accrues €1,000 × 10% × 73/365 = €20, plus the €40. Common mistakes: applying these rules to consumers, whom the Directive doesn't cover, and leaving the due date off the invoice. Outside the EU, check your own country's law.
Read more: Invoice payment terms explained.