Learn how to set up and apply late fees to overdue invoices automatically in QuickBooks Online.
Apply late fees to overdue invoices to encourage your customers to pay on time. You set the fee amount and when to apply it to the invoices. Then, let QuickBooks calculate the late fees and automatically apply them to overdue invoices as a line item.
QuickBooks only calculates and applies late fees to overdue invoices the day after you turn on the late fee setting. You can still manually apply late fees as a line item on older invoices.
Important: There may be limits on the amount and type of fees you may charge your customers. You should confirm the requirements in your jurisdiction and how they relate to you.
Set up the default late fee setting
Turn on and set up the default late fee settings to apply late fees to your customer’s overdue invoices.
- Go to Settings ⚙, then select Account and settings.
- Select Sales, then, in the Late fees, select Edit ✎.
- Turn on the Default charge applied to overdue invoices switch.
- There are three types of fees you can choose from, select the one you want to use.
- Flat rate: Applies a specified amount.
- Percentage of remaining balance: Applies a percentage of the remaining amount of the invoice.
- Flat rate and percentage of the remaining balance: Applies a one-time specified amount, plus a percentage of the remaining amount of the invoice. To use this option, select Percentage of remaining balance, then the Apply an upfront, one-time flat fee checkbox.
- Enter the Amount and/or Percent (%) of the fee.
- Select the Frequency dropdown, then choose how often you charge customers.
- (Optional) If you want to give them a grace period, select how many days to give them from the dropdown.
- (Optional) Edit the default name Late fee.
- Select Save.
After you turn on late fees, QuickBooks 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”.
Set up a personalized late fee for a customer
If you don’t want the default late fee settings to apply to some of your customers, here’s how to personalize them.
- Go to Get paid & pay or Sales & Expenses, then select Customers (Take me there).
- Select the name of the customer you want to set a late fee for.
- Select Late Fees, then make sure the switch is on.
- Select Customize if you want to personalize this customer’s late fee. If not, then Use Default.
- Select Save.