Summary
- Statutory interest is 8% above the Bank of England base rate, charged daily as simple interest, plus a fixed compensation fee of £40, £70 or £100 depending on invoice size.
- Xero has no late payment fee feature. This means the calculation always has to be manual if you use Xero.
- Treasure by Trove calculates the fee for free and raises it in Xero. No card required, Xero-only.
- Free tools don’t chase. No free tool applies fees automatically or sends them to your customer. If you need this, it’s worth looking at paid options.
- Trove does the whole process end-to-end. Interest is calculated and applied automatically, the customer is notified, interest appears on statements. The works.
What you’re entitled to charge
Under the Late Payment of Commercial Debts (Interest) Act 1998, a business invoicing another business can claim statutory interest at 8% above the Bank of England base rate, calculated daily as simple interest on the overdue amount. On top of that you can claim a fixed compensation sum: £40 on invoices under £1,000, £70 between £1,000 and £9,999.99, and £100 on £10,000 or more.
The right applies to business and public sector customers, and not to consumers. It exists from the day after the due date, whether or not you mention it. Our guide to whether late payment charges are legal in the UK covers when the right applies and the contract wording that supports it.
What free late fee software can do
Treasure by Trove does four things automatically:
- You can choose between setting up your own late fee policy or use the statutory rates
- Treasure then calculates a fee when you upload an invoice or connect your Xero account to import them
- If you do connect your Xero, Treasure can also raise the late fee in Xero directly
- Finally, Treasure keeps the late fee up to date as invoice accrues
Treasure (by Trove) is free permanently and works only with Xero.
Free late fee software does not chase the invoice
Treasure does have a few limitations:
- It doesn’t send any emails to your customer
- It doesn’t watch your ledger and apply fees when invoices tip overdue
- It can only apply one policy, not several.
If you want a system that integrates with the rest of your credit control process, Trove’s paid plans can help.
How Trove automatically applies late fees correctly
If you need more robust late fee functionality, Trove adds the following:
- It automatically raises late fees in line with the policy you set
- It integrates late fees into the rest of your workflow, so you can send reminders, then raise a late fee, then continue sending reminders as part of the same thread
- You can set up multiple late fee policies if you want to treat different customers differently
- You can keep all late fee invoices within Trove, so your Xero doesn’t get cluttered with invoices that may be waived
- It can show late fees as statement lines without putting invoices into Xero
- If you do post invoices to Xero, you can choose which account to post them to: Sales, Other revenue, Interest income etc.
- It keeps all history of late fees raised against each customer
If you’re not sure, Trove runs a free 30-day trial so you can test out late fee functionality (and the rest of Trove) to see if it’s what you need.
Frequently asked questions
Is there genuinely free late payment fee software? Yes, for the calculation. Treasure is free permanently with no card and no volume limits and will raise the fee in your Xero account.
Does Xero calculate late payment fees? No. Xero has no late fee functionality of any kind. The manual route is to work out the figure yourself and raise it as a separate no-VAT invoice, which our guide to adding late payment fees in Xero sets out.
Can I charge interest without software? Yes. The right is statutory and doesn’t depend on any tool. The difficulty is that interest accrues daily, so any figure you record is out of date the next day.
Does it work with QuickBooks or Sage? Treasure connects to Xero only.
Do I need to tell customers in advance? Not legally, but it helps. Stating the terms on your invoices and in your contract makes the charge expected rather than contentious.
Getting started
Treasure is free to use, with no card required and connects to Xero to raise fees for you.
If you’re charging fees across a full ledger as part of a credit control system, Trove runs a free 30-day trial or you can book a demo.
