How common late payment is
In the 2025 Intuit QuickBooks report on late payments, 56% of the US small businesses surveyed said they were owed money from unpaid invoices, about $17,500 each on average, and 47% had some invoices more than 30 days overdue. See the report (survey of 2,487 US small businesses, January 2025).
No federal late-payment interest for private invoices
The federal Prompt Payment Act makes federal agencies pay proper invoices on time and pay interest when they do not. It applies to payments by the federal government, not to invoices between private businesses.
State prompt payment laws
Most states have prompt payment rules, but they mainly cover payments by state and local governments and construction projects (for example payments from owners to contractors and from contractors to subcontractors). For ordinary invoices between private businesses, payment timing and any late fee are usually whatever the parties agreed in writing. Rules differ by state, so check the law where you and your customer do business.
Late fees and interest come from your terms
A late fee or interest charge is normally only enforceable if it was agreed before the work was done, for example in a signed contract or in the payment terms the customer accepted. Many states also limit the interest rate that can be charged (usury limits), and the limits differ for businesses and for consumers. If you want to charge a late fee, write it into your terms and state it on every invoice.
Debt collection laws and your own reminders
The federal Fair Debt Collection Practices Act (FDCPA) covers consumer debts, which are debts for personal, family or household purposes, collected by third-party debt collectors. It does not cover business invoices, and a business collecting its own debt is generally outside it. The FTC explains the limits of the law in its guidance. If you sell to consumers, or you hand overdue invoices to a collection agency, different and stricter rules can apply; talk to an adviser first.
Email rules
Payment reminders to an existing customer about an invoice are generally “transactional or relationship” messages under the CAN-SPAM Act, which are exempt from most of its rules but must not contain false or misleading header or routing information. See the FTC's CAN-SPAM guide for business.
Practical steps
- Put clear payment terms, and a late fee if you want one, in every contract and on every invoice.
- Send a polite reminder before the due date and again soon after it passes.
- Keep a record of every reminder and every payment promise your customer makes.
- If an invoice is disputed, stop the routine reminders and sort out the issue first.
- Before sending anything threatening, or handing a debt to a collector, check with a qualified adviser.
How GuardRailPay helps
GuardRailPay sends reminders before and after the due date, attaches the original invoice, understands customer replies and keeps a record of promised payment dates, so you have a clear trail if an invoice becomes overdue. It does not add fees or interest and it does not threaten customers. See how it works and pricing.
This guide is general information, not legal advice. State laws change and differ; speak to a qualified adviser about your situation.