Late Fees

A late fee is an additional charge applied when an invoice is paid after its due date. Enabling late fees helps minimize overdue payments, improves collection efficiency, and ensures proper cash flow. You can configure late fees as a percentage of the invoice’s total amount or set a fixed amount, and you can also choose to exclude specific customers when needed.

Scenario: Zylker, a cloud-based storage company, has a large customer base. When the invoices are not paid by the due date, it becomes overdue and affects the expected cash flow. Zylker can enable Late Fees, and Zoho Billing will automatically identify overdue invoices, and apply the late fee based on your configured preferences. A separate late fee invoice is then generated for customers. This helps you manage overdue payments efficiently and maintain consistent cash flow.

Note: This feature is available only for certain plans of the Canada (early access), US and Global editions of Zoho Billing. Visit the pricing page to check if it's available in your current plan.

Enable Late Fees

To apply late fees for your overdue invoices, you must enable it first for your organization. Here’s how:

Go to Settings.
Click Invoices under Sales.
Slide the toggle in the Late Fees section to enable it for your organization.
In the Late Fee Preferences pop-up, enter the following details:

Field	Description
Apply Late Fee Based On	Choose if you want to charge late fees based on: Percentage - A percentage of the invoice’s due amount will be calculated as late fees. Fixed Amount - A fixed amount will be collected irrespective of the invoice’s total amount.
Invoice Overdue By	Enter the number of days after the due date when a late fee should be charged.
Percentage / Fixed Amount	Enter the late fee percentage or the fixed amount you want to charge.
Generate late fee invoices as drafts	Check this box if you want the late fee invoices to be generated in the Draft status. You can review and send them or mark them as Sent.
Would you like to apply taxes on the late fees amount?	Choose the taxes that you want to apply to the late fees amount: 1. Don’t Apply Taxes 2. Apply taxes 3. Apply Custom Rates - You can choose a custom tax rate that you want to apply.
Default Account for Late Fees	By default, the late fee amount will be tracked in the Late Fee Income account. You can change it if required.

Click Save to apply the preferences.

Once you enable late fees, it will be applied to all new invoices and for existing invoices if it matches your late fee criteria.

How Late Fees is Calculated

Zoho Billing calculates late fees based on the preferences configured in your organization. You can choose to apply late fees as a percentage of the overdue amount or as a fixed charge. When an invoice crosses the due date and meets the overdue criteria, a late fee invoice will be generated.

Let’s understand this better with a scenario

Scenario: Let's say Zylker offers monthly subscription plans to its customers. One of their customers receives an invoice for $500, due on the 10th of the month. Zylker has configured late fees to be charged as 5% of the overdue amount, applied 7 days after the due date.

If the customer does not pay by the due date, the invoice becomes overdue. On the 17th day, Zoho Billing automatically identifies the overdue invoice and calculates the late fee.

Late Fee = Invoice Amount × Percentage

Late Fees = $500 × 5% = $25

Zoho Billing then generates a separate late fee invoice for $25 and sends it to the customer (or saves it as Draft, based on Zylker’s preferences). This ensures overdue invoices are addressed promptly and helps Zylker maintain reliable cash flow.

If you select the Fixed Amount option, Zoho Billing will automatically generate a late fee invoice for the same fixed charge, regardless of the invoice’s total value.

Send Late Fee Invoice

Based on the preference set, the late fee invoice will either be generated and sent to the customers automatically or you can choose to review the draft before sending it to your customers.

To send the late fee invoice manually:

Go to Sales on the left sidebar.
Click Invoices.
Select Late Fee from the filter in the Invoice List page.
Go to the late fee invoice from the list and click Send Mail.
Click Send in the following email template page.

The late fee invoice will be sent to your customer.

Late Fee Payment

Based on how you share the late fee invoice, your customer can pay for the late fee amount in two ways:

Pay Only the Late Fee Invoice Amount

To collect only the late fees that you’ve charged your customers, you can send late fee invoices directly to your customers. These invoices will contain only the late fee amount, calculated based on your organization’s Late Fees configuration. Your customers can then make the payment either through the Customer Portal or using the late fee invoice link you share with them.

Pay the Late Fee Amount Along With the Invoice Amount

To collect both the invoice amount along with the associated late fee(s), you can send the invoice payment link that includes a late fee, your customer will be required to pay both the invoice amount and the late fee together. However, if the customer has already paid the late fee, it will not appear on the payment page. Instead, its details will be shown on the invoice details page.

To do this, your customer should:

View the late fee invoice from the customer portal or the shared link.
Click Pay Now at the top right corner of the page.
Enter the card details and click Make Payment.

Other Actions

Exclude Late Fee for Customers

You can exclude your specific customers from paying late fees. Here’s how:

Go to Sales on the left sidebar.
Click Invoices.
Select the particular customer to whom you don’t want to charge late fees.
In the Other Details section of the Overview tab, slide the Late Fee toggle.

Once it is disabled for the customer, they will no longer be charged late fees.

Edit Late Fees Preferences

To edit the late fees preferences in your organization:

Go to Settings.
Click Invoices under Sales.
In the Late Fees section, click Configure Preferences.
Make the required changes in the Late Fees Preferences pop-up and click Save.

Edit or Delete Late Fee Invoices

Late fee invoices function the same as regular invoices and can be edited or deleted if required.

To edit a draft late fee invoice, open the invoice and click Edit to modify its details.
To delete a late fee invoice, open the invoice and click More > Delete.

Note: Deleting a late fee invoice does not affect the invoice associated with it.

Disable Late Fees

If you no longer want to charge your customers with late fees, you can disable it for your organization. Here’s how:

Go to Settings.
Click Invoices under Sales.
Slide the toggle back in the Late Fees section to disable it.

The feature will be disabled and late fees will no longer be applied to invoices. However, existing Late Fee invoices will not be affected.

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