Should your business charge late-payment interest?
- Business Studio
- Jul 29
- 4 min read
Over the past few months, we have noticed a growing trend among businesses: some customers are taking longer to pay their invoices. While the occasional late payment is manageable, when the burden of overdue debtors starts to quickly build up, this can cause unnecessary pressure on cash flow and leave your business to finance these costs until the customer pays up.
Payment terms can be clearly stated on invoices, but there is little incentive for customers to meet those terms if the consequences for paying late are never enforced. Which raises the important question – should you be charging interest on overdue invoices?
Xero currently does not provide a straightforward built-in function to automatically calculate and apply interest to overdue invoices. This has led us to investigate some other options available to businesses wanting to introduce interest charges, as well as the practical considerations to think about before making the change.
Charging interest will not be the right approach for every business or every customer, but introducing interest charges can encourage customers to pay on time, reinforce the payment terms and keep cash flow running smoothly. There are several software programs that integrate directly with Xero.
EasyInterest
This software is great for businesses primarily looking for a simpler way to calculate and charge interest. EasyInterest imports outstanding invoices from Xero, calculates interest based on the settings you select, and once approved, the interest charge is created as a new invoice within Xero.
Businesses can set a standard interest rate or different rates for individual customers; previously applied interest can also be reversed in Xero via a credit note. This suits businesses that want greater control over when and how interest gets charged.
EasyInterest is listed in the NZ Xero App Store – added in 2025.
EasyInterest plans start at approximately $24 per month for up to 10 overdue customers. This is their starter plan; they also have a business, corporate and unlimited plan if your business needs are higher.
Example:
Customer A — 5 overdue invoices
Customer B — 3 overdue invoices
Customer C — 8 overdue invoices
That would count as 3 overdue customers, and you’d still be within the limits for the starter plan.
Find out more information here:
Paidnice
Paidnice is a more comprehensive option available for Xero users. Paidnice automatically calculates and applies late fees or interest to overdue invoices. Businesses can choose a fixed fee, a percentage charge, or an annual interest rate. Rules can be set around how many days before the interest is charged and different policies can be set for different customers.
Paidnice also offers automatic payment reminders, statements, payment plans and a customer payment portal.
Paidnice is a more expensive option starting at $109 per month plus GST, which includes 150 invoices per month; higher plans are available depending on invoice volumes and features required.
Find out more information here:
Chaser
Chaser is a broader accounts receivable and debtor-management platform that integrates with Xero. Chaser will send automated reminders and debtor follow-up. Chaser can apply fixed late fees, percentage-based chargers or daily accruing interest to overdue invoices.
For Xero users, these chargers can be added directly to the existing invoice as a new line as opposed to creating a new invoice.
Chaser provides more functionality around debt collection, workflows and debtor management. Chaser may be more appropriate for businesses with a larger debtor ledger, or a significant amount of time is being spent chasing customers.
Its current NZ pricing starts from NZ $399 per month, making it a more substantial solution than EasyInterest and Paidnice.
Find out more information here:
What option is right for me?
It’s important to review each option and understand what will work best for your business. Giving the free trials a go is a great way to get a practical understanding of how each piece of software will work.
For a small business simply wanting to introduce interest on overdue accounts, EasyInterest or Paidnice may be the most practical place to start. EasyInterest is specifically focused on calculating and applying interest, whereas Paidnice provides more automation around the overall collection process.
Importantly, installing this type of software does not automatically give a business the right to charge interest; your terms of trade and customer agreements should clearly state that interest and late payment charges apply, including when and how they will be calculated. Your terms of trade should be reviewed before implementing interest-calculating software.
Get in Touch
If late payments are becoming a recurring issue in your business and you are considering introducing interest and late-payment fees, get in touch with us before making the change.
Business Studio can help you:
Review your current payment terms,
Review your terms of trade,
Consider whether charging interest is appropriate for your customers,
Discuss the different Xero-compatible options available.
Disclaimer:
The information provided in this article is general in nature and does not constitute personalised business or tax advice.
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