Guide to Charging Interest and Late Fees

Select software with built-in templates for charging fees and interest

Install software that not only has invoices but will compute late charges for you.

I recommend: See software reviews at Qarchive.org. See Instant Billing to download an add-on to Instant Quote Professional. Instant Billing allows you to add finance charges to past due balances and late fees to late payments. Markosoft Accounts Receivable software has built-in features that automatically calculate and assess late fees. You can print late notices with a default template or customize one.

Use the right forms that include agreement to pay interest

A promissory note is a written promise to pay money that is owed. This is written evidence of the debt and the terms under which it will be paid, including any interest or late fees.

I recommend: FindLegalForms.com has debt collection forms and legal settlements. A collection of payment letter can help you collect payment. Go to Nolo.com to download a form for amortized installments with interest. An article from the Minnesota State Court, reprinted from "Bench and Bar of Minnesota," has in-depth advice from a lawyer on charging interest to late-paying clients.

Send a demand letter

If someone owes you money and gets behind on the payment plan, work out a new one. If that doesn't work, send a demand letter. But don't threaten to take action -- for example, sue in small claims court – unless you intend to really do it.

I recommend: See Agreement to Modify Promissory Note. Download Demand for Overdue Payment on Promissory Note from Nolo. You'll get a template and be able to request specific action from your client. FindLegalForms.com also has appropriate documents.

Use calculators to figure out interest rates

Late fees are usually assessed as a monthly finance charge.

I recommend: Bankrate.com has calculators, along with rate information on more than 300 financial products.