Apply late fees to unpaid invoices.
A monthly late fee percentage is really a daily interest charge: dividing it by thirty gives the rate that accrues each day the invoice sits unpaid. Adding a flat administrative fee covers the cost of chasing. Annualising the monthly rate is worth doing before you send the demand, because a 1.5% monthly charge is 18% a year and many jurisdictions cap what a business may charge.
Late fee accrual
Late fee = invoice x (monthly rate/100 / 30) x days overdue + flat fee; annualised rate = monthly rate x 12
Late payment interest and recovery fees are regulated in many jurisdictions, with statutory rates and caps that override contract terms. Verify the limits that apply to you before charging — this is not legal advice.
In many places statutory interest applies to commercial debts even without a clause, but the rate and any recovery fee are set by law. A written term is safer and easier to enforce.
It is a common commercial figure, though it annualises to 18%. Some jurisdictions cap late fees or restrict them for consumer clients.
Stating the fee and waiving it once often changes behaviour more effectively than applying it silently. What matters is that the term exists and is visible on the invoice.