Half of business-to-business (B2B) invoices in the U.S. are paid late, and a third take over 90 days to be settled beyond their initial deadline. This information comes from Upflow, an accounts receivable automation platform. The company has recently published a report on late payments.
Since such delays can severely impact cash flow, there are differing late fees businesses are entitled to charge. In the U.S. these fees vary depending on the territory and the report provides a state-by-state breakdown. Other countries have different approaches to this issue.
In certain states, businesses waiting longer than 90 days could be entitled to late fees totalling up to 60 percent. The impact depends on the policy of different firms and companies that do not offer credit or debit card payment options can experience wait times up to three times longer compared to those that do.
The new report assesses business payment behaviours, analysing how various sectors are invoicing, what they are typically owed, and how long it takes for their invoices to be paid.
The report includes actionable advice from this data, aimed to help business leaders tighten up their payment processes and ultimately cut down on cash flow problems that could negatively affect their business.
How many invoices are paid late?
According to the research, over half (57 percent) of businesses are paid late, with a third (33 percent) having to wait longer than 90 days past their initial due date to receive payment.
This extended delay can create significant cash flow challenges, forcing many businesses to rely on credit, delay growth plans, or even risk insolvency if payments are not received in time.
Why is this a problem?
While waiting for those on the other end to pay their overdue invoices, businesses can sometimes need to rely on lines of credit which can come with interest rates, increasing the overall cost of doing business. Over time, this reliance on credit could lead to unsustainable debt levels.
To address this, some businesses consider adding late payment fees to cover the costs they may incur by being forced to wait. The level that can be charged in the U.S. varies.
How much are businesses allowed to charge in late payment fees?
The amount businesses are legally allowed to charge in late fees can vary widely depending on local regulations – there is no specific federal legislation that covers this.
Of the 50 states (plus DC), 18 have specified amounts on how much businesses can charge as a maximum – the rest are unspecified.
The following states are ranked from highest to lowest in terms of the maximum late fees businesses are permitted to charge:
| State | Late Fees Legislation | Late Payment Fees Owed after 90 days |
| Wisconsin | Maximum of $20 or 20 percent per month; five-day grace period | 60% |
| Illinois | Maximum of $20 or 20 percent, whichever is greater; no grace period | 60% |
| North Carolina | Maximum of $15 or 15 percent per month; no grace period required | 45% |
| Tennessee | Maximum of $30 or 10 percent per month; five-day grace period | 30% |
| New Mexico | Maximum of 10 percent per month; no grace period required | 30% |
| Hawaii | 8 percent per month maximum; no grace period | 24% |
| Minnesota | Maximum of 8 percent per month; no grace period required | 24% |
| Idaho | 5 percent of past due amount maximum; 10-day grace period | 15% |
| Florida | 5 percent of past due amount maximum; 15-day grace period | 15% |
| Delaware | 5 percent per month maximum; five-day grace period | 15% |
| Washington, D.C. | 5 percent per month maximum; five-day grace period | 15% |
| New York | Maximum of $50 or 5 percent per month; five-day grace period | 15% |
| Maryland | Maximum of 5 percent per month; 15-day grace period | 15% |
| Oregon | Maximum of 5 percent per month; no grace period required | 15% |
| Nevada | Maximum of 5 percent per month; no grace period required | 15% |
| New Hampshire | Maximum of 5 percent per month; no grace period required | 15% |
| Maine | Maximum of 4 percent per month; 15-day grace period | 12% |
| Iowa | Maximum of $60 per month for balances under $700 and $100 per month for balances over $700; no grace period required | $300 |
These numbers are a maximum amount, so other states where direct guidance is not given could charge even more.
Besides late fees, what other tactics can work?
The payment method plays a crucial role in ensuring timely payments. For example, consider a company that rarely uses card payments (less than 20 percent of their transactions). Our data shows that this low adoption adds an average of 15 days to their payment delays, which can feel like forever when managing cash flow for projects and payroll.
