How to Charge Late Fees on Invoices in South Africa

To charge late fees on invoices in South Africa, state the late fee rate clearly on your invoice or in your service agreement before work begins. Once an invoice is overdue, calculate the fee based on your stated rate (typically a flat amount or a percentage of the outstanding balance per month) and add it to the next invoice or to the original invoice as an additional line item.

Late fees are enforceable in South Africa provided the terms were communicated to the client in advance. Surprising a client with a late fee they were not informed about will not hold up if disputed.

What is the legal basis for late fees in South Africa?

There is no specific legislation that prescribes a late payment rate for general business invoicing in South Africa. The Consumer Protection Act (CPA) and National Credit Act (NCA) apply to certain consumer transactions, but standard business-to-business invoicing is generally governed by the contract between the parties.

This means you can set your own late fee rate, as long as:

• The rate is stated in your terms, which the client agreed to (explicitly or by accepting the work)
• The rate is not so unreasonable that a court would consider it a “penalty clause” rather than a genuine pre-estimate of loss

Rates between 1% and 5% per month on the outstanding balance are commonly used by South African small businesses and are unlikely to be challenged as unreasonable.

How to set a late fee rate

Two common approaches:

Flat fee per month: A fixed amount charged for each month the invoice remains overdue. Example: R150 per month. Simple and predictable.

Percentage per month: A percentage of the outstanding balance charged each month. Example: 2% per month. Scales with the invoice amount, which is fairer for larger invoices.

Example calculation (2% per month):

• Invoice amount: R10,000
• Overdue by 30 days: late fee = R200 (2% of R10,000)
• Overdue by 60 days: late fee = R400 (2% for month 1, 2% for month 2 — no compounding unless stated)

Note: unless your terms specifically state that late fees compound, they are generally calculated on the original outstanding balance, not on the balance plus accumulated late fees.

Where to state your late fee policy

Your late fee terms should appear:

1. On every invoice, in the payment terms section: “A late fee of 2% per month applies to balances overdue by more than 7 days.”
2. In your service agreement or contract, if you have one.
3. In your quote, so the client is informed before accepting.

The more prominent and clear the disclosure, the stronger your position if a client disputes the fee.

Using a grace period

A grace period is a set number of days after the due date before the late fee starts applying. Common grace periods in South Africa are 5 to 7 days.

A grace period:

• Allows for minor delays in the client’s internal payment process
• Reduces disputes from clients who were slightly late due to banking delays
• Maintains goodwill for long-term relationships

State the grace period on your invoice: “Payment due within 14 days. Late fees of 2% per month apply after 7 days from the due date.”

How Rebill handles late fees automatically

Rebill’s late fees feature applies fees automatically based on your settings:

1. Set your late fee type (flat or percentage) and rate in Rebill settings
2. Set a grace period (number of days after due date before fees apply)
3. Set the maximum cap (optional, to limit how much a fee can accumulate)

When an invoice becomes overdue beyond the grace period, Rebill calculates the fee and adds it to the invoice automatically. The client receives an updated invoice and a notification. You do not have to track or calculate anything manually.

This is available on the Rebill Premium plan at R99/month.