> ## Documentation Index
> Fetch the complete documentation index at: https://docs.arcuserp.com/llms.txt
> Use this file to discover all available pages before exploring further.
# Late Fees
> Use Late Fees to turn on automatic finance charges for overdue invoices and set the flat fee or annual rate, the cap, the grace period, how the charge builds up, the minimum balance, tax, and the customer email.
A late fee is a finance charge Arcus adds to an overdue invoice. Use Late Fees to turn the feature on, choose how the fee is worked out, and decide which invoices qualify. When a fee is assessed, Arcus creates its own invoice for the customer and posts it to your books.
## Before You Start
* You need the **settings.view** permission to open the page.
* You need **settings.edit** to save. **Save Late Fee Settings** is shown to every role that can open the page, but the server refuses the save for a role without **settings.edit**.
* Late fees are off until you turn on **Enable Late Fees**. While it is off, no late fees are assessed, whether automatic or by hand.
* Check the rules for finance charges where you do business. The page reminds you that maximum finance charge rates vary by state and that Arcus does not provide legal advice.
## Open Late Fees
1. In the deck, open **Settings**.
2. Under **Payments & Checks**, choose **Late Fees**.
The breadcrumb reads **Settings > Payments & Checks > Late Fees**. The [AR & Invoicing](/support/settings/ar-and-invoicing) page links here with **Go to Payments > Late Fees**, and you can also search for **Late Fees** in the command palette.
## Settings
Change the fields you need, then click **Save Late Fee Settings** once. All fields save together, and Arcus shows "Late fee settings saved".
### Enable Late Fees
The master switch. When it is off nothing is assessed.
### Rate and timing
| Field | What it does | Default |
| - | - | - |
| **Flat Fee Amount (\$)** | A fixed dollar amount charged each overdue cycle, whatever the invoice balance. Above $0, the percentage rate is ignored. Set $0 to use the percentage. | \$0 |
| **Annual Finance Charge Rate (%)** | The yearly rate. It must be above 0 and no more than 100 when the flat fee is \$0. With flat fee mode on, the page says "Flat fee mode is active -- this rate is ignored." | 18 |
| **Maximum Fee Per Cycle (\$)** | Caps the fee after the flat or percentage amount is worked out. \$0 means no cap. | \$0 |
| **Grace Period (days)** | An invoice overdue by this many days or fewer is skipped. From 0 to 365. | 30 |
| **Compounding Method** | How the charge builds up. See below. | Monthly |
| **Assessment Day of Month (1-28)** | Shown only for **Monthly**. Fees are assessed only on this calendar day. It stops at 28 so every month has the day. | 1 |
| **Minimum Invoice Balance (\$)** | An invoice with a balance below this is skipped. | \$25.00 |
A **Grace Period (days)** of 0 or a \*\*Minimum Invoice Balance ($)** of 0 is saved, but when fees are worked out Arcus treats an empty or zero value as the default: 30 days and $25.00. To charge from the first overdue day, or on balances under $25.00, enter a small positive number instead, such as 1 day or $0.01.
The rate is a yearly rate. An 18 percent rate charges 1.5 percent a month. Earlier versions of this page offered "1.5" as the default and called it a monthly rate, which charged a twelfth of what was intended. The page now says **Annual Finance Charge Rate (%)** and defaults to 18. If you saved a rate before, check that it is the yearly figure you intend.
### Compounding method
| Choice | How the fee is worked out |
| - | - |
| **Monthly (rate / 12 x balance)** | One twelfth of the yearly rate times the balance, once per cycle, on the assessment day. |
| **Daily (rate / 365 x balance x days overdue)** | The yearly rate divided by 365, times the balance, times the days overdue. |
| **None / flat (rate x balance, one-time)** | The whole rate times the balance, once. |
For example, 18 percent a year monthly on a $1,000.00 balance is $15.00. With **Maximum Fee Per Cycle** at $10.00, the fee is $10.00. A flat fee of $25.00 charges $25.00 no matter the balance or the rate.
### Tax and notifications
* **Finance Charges Are Taxable**: when on, Arcus asks AvaTax to calculate sales tax on the fee. It needs your AvaTax connection to be active, and whether finance charges are taxable depends on the jurisdiction. When tax cannot be calculated, the fee is still posted without tax.
* **Email Customer on Assessment**: when on (the default), Arcus emails the customer the Late Fee Assessed message each time a fee posts.
## What Makes An Invoice Eligible
An invoice is assessed only when all of these hold. Otherwise Arcus skips it and says why.
* Late fees are enabled, and a flat fee or a rate is set.
* The document is an invoice or a sales order that has been invoiced, and it is not paid, voided, a draft, or not yet invoiced. A cancelled, archived, or expired order is skipped too.
* The customer is not exempt. Mark a customer exempt with **Finance Charge Exemption** on the customer's account page.
* The invoice has a due date and is past the grace period.
* The balance is at or above **Minimum Invoice Balance**.
* Goods billed on the invoice have shipped. Arcus does not charge a fee on an invoice for goods that were billed but not yet shipped.
* The invoice was not already assessed today.
* The computed fee is above \$0.
## How Fees Are Assessed
Every day Arcus checks each company that has late fees on. With **Monthly** compounding it assesses only on the **Assessment Day of Month**. You can also run an assessment by hand from **Assess Late Fees** in [AR Management](/support/accounting/ar-management), which previews each fee before anything is charged.
Each assessed fee:
* Creates its own late fee invoice for the customer, linked to the overdue invoice.
* Posts a journal entry that debits Accounts Receivable and credits Finance Charge Income.
* Adds tax when **Finance Charges Are Taxable** is on and tax can be calculated.
* Emails the customer when **Email Customer on Assessment** is on.
## Messages You May See
| Message | What it means |
| - | - |
| "Late fee settings saved" | Your settings are saved and apply from the next assessment. |
| "Flat fee must be 0 (disabled) or a positive amount." | Fix **Flat Fee Amount (\$)**. |
| "Rate must be a positive number when flat fee is 0 (disabled)." | Enter a rate above 0, or set a flat fee. |
| "Rate cannot exceed 100%." | Lower the rate. |
| "Maximum fee must be 0 (uncapped) or a positive amount." | Fix **Maximum Fee Per Cycle (\$)**. |
| "Grace period must be 0 or more days." and "Grace period cannot exceed 365 days." | Enter a grace period from 0 to 365. |
| "Minimum invoice amount must be 0 or more." | Fix **Minimum Invoice Balance (\$)**. |
| "Assessment day must be between 1 and 28." | Pick a day from 1 to 28. |
| "Failed to save late fee settings", or another reason from the server | Nothing saved. The most common reason is a role without **settings.edit**. |
| "Access denied to this entity" | Your sign-in has no membership in the company the page is working in. |
A red message above the button shows the first problem and nothing is saved until you fix it.
## What Changes Elsewhere
* **Invoices and AR**: each fee is a new invoice on the customer's account, so it shows in aging and on the customer's open invoices like any other.
* **Accounting**: each fee posts a journal entry to Accounts Receivable and Finance Charge Income. If a fee posts without tax that you wanted, void the fee invoice and assess again.
* **Customer email**: the Late Fee Assessed email goes out when notifications are on.
* **Tax**: with taxable fees on, AvaTax is called for each fee.
* **Audit trail**: each save is recorded in the Audit Log with the old and new values, and each fee is recorded when it is assessed.
* **Other open sessions**: when another administrator saves a change here, your page refreshes to show it.
Before this release, saving on this page returned a "not found" error, so late fee settings could not be changed. Saving now works, and the settings you save persist after a reload.
## Related Articles
Set the escalating overdue reminder emails.
Set invoice timing, due days, statements, and overpayment handling.
Preview and assess late fees, record payments, and send statements.
Connect AvaTax and review how tax is calculated.
Manage the due dates that decide when an invoice is overdue.
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