Overdue invoice interest is one of the most misunderstood topics for NZ trade businesses. The short version: in New Zealand there is no automatic statutory right to charge interest on an overdue invoice — you can generally only charge it if your written terms say so, or if a court awards it. This guide explains can you add interest to unpaid invoices, what counts as a reasonable rate, how to word your terms, and walks through a worked example that acts as a simple overdue invoice interest calculator you can copy.
Can you charge interest on overdue invoices in NZ?
Yes — but only if you've earned the right to, in writing, before the work was done. Unlike some countries, NZ has no law that automatically entitles a supplier to interest on late payment. If your quote, contract, or terms of trade don't mention interest or an overdue invoice penalty charge, you have no contractual basis to add one, and the customer can refuse to pay it.
There are two ways interest becomes payable:
- By agreement — your written terms of trade state an interest rate (and/or a late fee) for overdue accounts, and the customer accepted those terms.
- By court award — if you take the debt to the Disputes Tribunal or court, a referee or judge may award interest as part of the judgment, even without a contract clause.
So the honest answer to "can you add interest to unpaid invoices?" is: only if your terms allow it, or a court grants it. Adding surprise overdue invoice charges to an invoice when your terms are silent isn't enforceable and can breach the Fair Trading Act 1986 if it misleads the customer about what they owe.
What's a reasonable rate or penalty?
There's no fixed legal cap for business-to-business terms, but the charge must be reasonable and reflect a genuine cost to you, not a punishment. Courts can refuse to enforce a penalty that's wildly out of proportion. Common, defensible approaches NZ tradies use:
| Approach | Typical setting | Notes |
|---|---|---|
| Annual interest rate | 1–2% per month (≈12–24% p.a.) | Most common; accrues daily or monthly on the unpaid balance |
| Flat late fee | $25–$50 per overdue invoice | Simple overdue invoice penalty charge; must be in your terms |
| Admin/recovery cost | Actual reasonable costs | Recoverable if your terms say overdue accounts incur recovery costs |
Whatever you pick, write it as a rate or fixed figure, state when it starts (e.g. "on accounts more than 7 days overdue"), and apply it consistently.
Worked example: a simple overdue invoice calculator
Here's how to calculate interest yourself — no fancy overdue invoice interest calculator app required. The standard formula for simple daily interest is:
Interest = Invoice amount × (annual rate ÷ 365) × days overdue
Say you're owed $4,000, your terms charge 18% per year (1.5% per month), and the invoice is 30 days overdue.
| Step | Calculation | Result |
|---|---|---|
| Daily rate | 18% ÷ 365 | 0.0493% per day |
| Daily interest | $4,000 × 0.000493 | $1.97 per day |
| 30 days overdue | $1.97 × 30 | $59.18 |
| New balance | $4,000 + $59.18 | $4,059.18 |
So after 30 days you'd be entitled to add roughly $59 in interest — provided your terms allow it. Used this way, the formula doubles as your own overdue invoice calculator: change the amount, rate, or days and the maths holds. Keep the working on file so you can show the customer exactly how the overdue invoice charges were derived.
How to word your terms so interest is enforceable
The interest clause is worthless if the customer never agreed to it. Put your terms of trade in front of customers before you start — on the quote, the job acceptance, or a signed terms document — not buried on the back of the final invoice. A clear, plain clause works best:
Accounts not paid within {7} days of the invoice date may incur interest at {1.5%} per month on the outstanding balance, calculated daily, plus any reasonable costs of recovery.
That single sentence gives you a contractual basis under the Contract and Commercial Law Act 2017. Remember the Limitation Act 2010 gives you six years to pursue a debt, but interest is far easier to recover when it's documented and consistently applied from day one. For more on putting these clauses in the invoice itself, see how to write invoices that get paid.
Interest is a tool, not a debt-collection strategy
Charging interest is fair and signals you're serious, but it rarely gets the money in by itself — a customer ignoring a $4,000 invoice won't suddenly pay because it's now $4,059. The real lever is consistent, timely follow-up: send reminders on a schedule and pick up the phone before the debt goes stale. If chasing isn't getting traction, TradeFlow makes professional follow-up calls on your behalf so you can stay on the tools. For the legal limits on how you chase, read debt collection laws in NZ; for the recovery process end to end, see small business debt recovery in NZ.
Frequently asked questions
Can you add interest to unpaid invoices if your terms don't mention it?
No. Without a written term that the customer agreed to, you have no contractual right to charge interest on an overdue invoice. You'd have to ask a court or the Disputes Tribunal to award it. Always add an interest clause to your terms of trade before the job starts.
Is there an official overdue invoice interest calculator for NZ?
There's no single official tool for contractual interest. Use the simple daily-interest formula above as your own overdue invoice interest calculator: amount × (annual rate ÷ 365) × days overdue. For court-awarded interest, the Disputes Tribunal or court sets the figure.
What's a reasonable overdue invoice penalty charge?
A penalty must reflect a genuine cost, not punish the customer. Most NZ tradies use 1–2% per month interest or a modest flat late fee of $25–$50. An overdue invoice penalty charge that's wildly excessive may be unenforceable.
Can the Disputes Tribunal award interest even without a contract clause?
Yes. Even if your terms are silent on interest, the Disputes Tribunal or a court can award interest as part of a judgment. A contractual clause just makes it simpler and more certain.
Sources
- business.govt.nz — getting paid: https://www.business.govt.nz/getting-paid/
- Contract and Commercial Law Act 2017: https://www.legislation.govt.nz/act/public/2017/0005/latest/DLM6844033.html
- Limitation Act 2010 (6-year limit on debt claims): https://www.legislation.govt.nz/act/public/2010/0110/latest/DLM2033140.html
- Disputes Tribunal: https://www.disputestribunal.govt.nz/
- Fair Trading Act 1986: https://www.legislation.govt.nz/act/public/1986/0121/latest/DLM96438.html
Update log
- 16 June 2026 — Published. Figures fact-checked against New Zealand government sources, including the Disputes Tribunal’s $60,000 jurisdiction limit (effective 24 January 2026, Ministry of Justice) and the six-year limitation period under the Limitation Act 2010. See Sources above.
Last reviewed: 16 June 2026.