1. What is Unpaid Invoice Interest Calculation?

Unpaid invoice interest calculation determines the interest owed on overdue invoices based on the invoice amount, annual interest rate, and number of days the payment is late. This helps businesses recover costs associated with delayed payments.

2. How Does the Calculator Work?

The calculator uses the interest calculation formula:

Where:

• \( I \) — Interest amount (currency units)
• \( A \) — Invoice amount (currency units)
• \( R \) — Annual interest rate (%)
• \( D \) — Days late (days)

Explanation: The formula calculates daily interest by dividing the annual rate by 365 days, then multiplies by the number of days late and the invoice amount.

3. Importance of Interest Calculation

Details: Calculating interest on overdue invoices helps businesses maintain cash flow, compensate for the time value of money, and encourage timely payments from clients.

4. Using the Calculator

Tips: Enter the invoice amount in currency units, annual interest rate as a percentage, and number of days the payment is late. All values must be valid positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a typical interest rate for overdue invoices?
A: Interest rates vary by jurisdiction and contract terms, but typically range from 1-2% per month (12-24% annually).

Q2: Is this calculation method legally enforceable?
A: This depends on local laws and contractual agreements. Many jurisdictions allow interest charges on overdue invoices if specified in the contract.

Q3: Should I use 365 or 360 days for annual calculation?
A: Most calculations use 365 days for annual interest, but some financial institutions use 360 days. Check your local regulations and contract terms.

Q4: Can I charge compound interest on overdue invoices?
A: Compound interest may be charged if specified in the contract, but this calculator uses simple interest calculation.

Q5: How should I communicate interest charges to clients?
A: Clearly state your interest policy in your terms and conditions, and provide detailed invoices showing the interest calculation for overdue amounts.