Can you charge interest on overdue invoices in NZ?
Yes — but only if you agreed it first. In New Zealand, late- payment interest and fees are enforceable when they sit in your terms of trade, accepted before the work started. Add them after the fact and a customer can refuse to pay them.
The rule in one line
You can charge what your contract says you can charge. There's no automatic statutory interest on unpaid commercial invoices in NZ, so the right to charge interest comes from your terms of trade, not from the law. Put it in writing, get it accepted, and it's enforceable.
What to put in your terms of trade
- An interest rate for late payment — for example, a set percentage per month on the overdue balance. Keep it reasonable; a court can strike out a penalty that looks punitive.
- A payment term — "due on the 20th of the month following invoice", or "7 days from invoice", so "late" has a clear start.
- Recovery costs — that the customer covers reasonable collection or legal costs if it goes that far.
Get the customer to accept the terms before you start — a signed quote, a ticked box, or an email agreeing to them all count.
Charging interest without souring the relationship
Most small businesses hold the right to charge interest and rarely use it. It's a lever, not a habit. Mention it once in a final notice, and often the invoice gets paid without you having to add a cent. Charging it in full is a last step, not a first one.
If interest alone doesn't move them
When a customer still won't pay, interest is rarely the blocker — attention is. A phone call surfaces the real reason far faster than another line on an invoice. See your options when a customer won't pay, including the Disputes Tribunal for claims up to $30,000.
Gary makes that call for you: it rings overdue customers in a friendly voice during business hours and reports back a payment date, a query, or a request to resend the invoice — so charging interest stays the exception, not the routine.
This guide is general information, not legal advice. For your own terms of trade, check with a lawyer or your industry body.
Common questions
Can I charge interest if it wasn't in my terms?
Not reliably. Without agreed terms, a customer can refuse the interest and you'd have to argue for it. Fix your terms of trade for next time.
Is there a legal maximum interest rate?
There's no fixed cap for commercial terms, but a rate that looks like a penalty rather than genuine compensation can be struck out. Keep it reasonable.
Can I add a late fee instead of interest?
Yes, on the same condition: it has to be in your agreed terms of trade before the work, and it should reflect real cost, not punishment.