1. What is the Simple Interest Formula?

The simple interest formula calculates interest on unpaid invoices based on the principal amount, annual interest rate, and time period. It provides a straightforward method to determine the interest owed on overdue payments.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( P \) — Invoice amount (currency)
• \( R \) — Annual interest rate (%)
• \( T \) — Time overdue (years)
• \( SI \) — Simple interest (currency)

Explanation: The formula calculates interest as a percentage of the principal amount over a specified time period.

3. Importance of Interest Calculation

Details: Accurate interest calculation is crucial for recovering appropriate compensation for overdue payments, maintaining cash flow, and enforcing payment terms in business contracts.

4. Using the Calculator

Tips: Enter invoice amount in currency, annual interest rate as a percentage, and time overdue in years. All values must be valid positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is the difference between simple and compound interest?
A: Simple interest is calculated only on the principal amount, while compound interest is calculated on both the principal and accumulated interest.

Q2: Can I use this for partial years or months?
A: Yes, simply convert the time period to years (e.g., 6 months = 0.5 years, 90 days = 90/365 years).

Q3: What is a typical interest rate for overdue invoices?
A: Interest rates vary by jurisdiction and contract terms, but typically range from 5% to 15% annually.

Q4: Is this calculation legally enforceable?
A: This depends on local laws and whether the interest terms are clearly stated in the original invoice or contract.

Q5: Can I calculate interest for multiple invoices?
A: For multiple invoices, calculate interest for each invoice separately and sum the results.