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Apply late fees to overdue invoices automatically in QuickBooks Online

SOLVEDby QuickBooksQuickBooks Online910Updated 1 month ago

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.

  1. Go to Settings ⚙, then select Account and settings.
  2. Select Sales, then, in the Late fees, select Edit ✎.
  3. Turn on the Default charge applied to overdue invoices switch.
  4. 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.
  5. Enter the Amount and/or Percent (%) of the fee.
  6. Select the Frequency dropdown, then choose how often you charge customers.
  7. (Optional) If you want to give them a grace period, select how many days to give them from the dropdown.
  8. (Optional) Edit the default name Late fee.
  9. 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.

  1. Go to Get paid & pay or Sales & Expenses, then select Customers (Take me there).
  2. Select the name of the customer you want to set a late fee for.
  3. Select Late Fees, then make sure the switch is on.
  4. Select Customize if you want to personalize this customer’s late fee. If not, then Use Default.
  5. Select Save.

Manage your late fee

  1. Go to Settings ⚙, then select Account and settings.
  2. Select Sales, then, in the Late fees, select Edit ✎.
  3. Make the changes you want, then select Save.

After you edit the default late fee settings, all the new late fees added to invoices will use the updated setting for their calculation. Any fees applied to previous overdue invoices will remain the same.

When you apply a late fee to an invoice, it shows up as a line item. Like other products, you can change the name of the late fee if you want. 

  1. Go to Settings ⚙, then select Products and services.
  2. Find the late fee you want to edit, then select Edit.
  3. Enter the name you want to use in the Name field.
  4. Select Save and close.

If you want to change the account to use to track the late fees you collect, here’s how.

  1. Go to Settings ⚙, then select Products and services.
  2. Find the late fee you want to edit, then select Edit.
  3. Select the Income Account dropdown, then select the income account you want to use.
  4. Select Save and close.

If you accidentally add a late fee to an invoice or simply want to remove it, here’s how.

  1. Go to Sales & Expenses, then Invoices.
  2. Find the invoices that you want to remove the late fee, then select Edit ✎.
  3. Select Delete Trash can on the late fee line item you want to remove.
  4. Select Save.

You can turn on late fees for customers who always pay late or turn them off if they pay on time. 

  1. Go to Get paid & pay or Sales & Expenses, then select Customers (Take me there).
  2. Select the name of the customer you want to turn on or off the late fee for.
  3. Select the Late Fees tab, then select Enabled or Disabled.

How many months are automatic late fees applied on an overdue invoice?

QuickBooks automatically adds late fees to overdue invoices for up to six months.

Will QuickBooks Online automatically add late fees to overdue invoices in closed periods?

We recommend that you follow up with a new invoice in the new period for the late fee amount.

Will QuickBooks Online automatically email the invoices after applying late fees?

No, QuickBooks won’t automatically email an invoice to customers on your behalf. However, you can manually send an updated invoice through email within QuickBooks Online.

When will I see the late fees apply to my invoices?

QuickBooks starts to calculate the late fees at 12 AM PT and should finish applying them sometime before 7 AM PT.

How are late fees calculated?

QuickBooks uses the invoice’s due amount that’s inclusive of sales tax, shipping costs, and discounts. 

I’ve set up automatic late fees. Why aren’t they showing up on my invoices?

There are several reasons why you may not see a late fee applied to an invoice automatically:

  • The invoice was already overdue before turning on the default late fee settings.
  • QuickBooks Online only applies late fees to invoices up to six months overdue.
  • Your Invoice is still unpaid but in a closed period.

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