Learn how to set up and add late fees to overdue invoices in QuickBooks Online.
Instead of manually tracking late fees for overdue invoices, QuickBooks can apply them automatically. You set the fee amount and when to apply the fee after the due date. The charge can be a flat fee or a percentage of the overall invoice amount. QuickBooks adds fees based on your settings.
Or, learn how to manually add surcharges and service fees to invoices.
What are automatic late fees?
Some small businesses apply late fees or finance charges on overdue invoices to encourage their customers to pay on time. QuickBooks Online can automatically calculate late fees. And add them to overdue invoices as a line below Product / Service.
The default settings apply to all customer invoices; however, you can also customize these fees for individual customers.
How do I set up late fees?
To set up your default automatic late fees in QuickBooks Online you must be logged in as the Master Administrator or Company Administrator. Go to:
- Select Settings ⚙️, then Account and settings.
- From the Menu ☰, select Sales.
- Choose Late fees. Check the box to turn on late fees.
You can specify the fee type, amount, grace period, and how it will show up on the invoice.
There are three different fee types to choose from:
|Percent||A percentage of the total invoice amount||10%|
|Flat Fee||A specified amount not dependent on the invoice total||$20|
|Flat fee and percent||A one time specified amount applied when the invoice becomes overdue. Plus a percentage of the total invoice amount applied after that if it remains overdue.||$20 + 10%|
$20 is applied when the invoice become overdue. The 10% fee is applied if the invoice remains overdue.
*All fee types are applied dependent upon the chosen frequency
What is a grace period?
The grace period is the amount of time you give your customers to pay without incurring late fees or interest. A grace period can be used in addition to your net terms.
Can I edit the name for how a late fee appears on my invoice?
You can customize how your late fees appear on your invoices when setting up your late fee preferences. Once the preferences are saved, you can edit the name for how a late fee appears on your invoice. Here's how:
- Select Settings ⚙on the toolbar, then choose Products and Services.
- Find the associated Product/Service item and select Edit.
How do I set different late fee rules for certain customers?
To set a custom fee for an individual customer:
- From the left menu, select Sales or Invoicing.
- Select Customers.
- Choose the customer you would like to customize. Then select Late Fees from the table. You have two ways to customize:
Waive late fees - This will prevent QuickBooks Online from ever calculating and applying late fees on an overdue invoice for this customer.
Override the default late fee settings - This will create a new set of rules that apply only to the chosen customer. You can have different late fee rules for different customers.
What income account are late fees tied to?
When you turn on late fees, QuickBooks Online automatically creates an income account to track the amount of fees you’ve collected for reporting purposes. The account is set up as an “Other Income” account type and is named “Late fee income”.
If you would like to edit or change how this account appears in your chart of accounts, here's how:
- From the left menu, select Accounting and choose Chart of Accounts.
- Locate the Late Fees account.
- In the Action column, select the down arrow. Then choose Edit.
From here, you can change the account type, detail type, name and description associated with your late fees.