Late payment interest

contable.io calculates and bills late-payment interest automatically when a customer pays an invoice after its due date. You don’t have to track it manually or remind the customer: the system does it at the moment the payment is applied.

How it works

When you confirm a cash receipt that applies to an overdue invoice:

1. The system computes days overdue between due date and payment date.
2. Applies the interest rate configured (annual or monthly).
3. Generates a new sales invoice for the interest amount.
4. Books the journal entry against the accounts you set up.

The interest invoice is linked to the receipt and original invoice, so you can audit the full flow from any of the three documents.

Before you start

To activate automatic interest you need:

1. Define the interest rate your company will apply (legal cap in Colombia: the Banco de la República usury rate).
2. A late-interest income account (suggested 421005 or similar).
3. Configured payment terms on your invoices so they have real due dates.

Configure the interest rate

1. Go to Settings → Receivables → Late-payment interest.
2. Enable Auto-calculate interest.
3. Define the rate:
   • Mode: annual effective, annual nominal or monthly.
   • Value: e.g. 19.5% annual effective.
4. Pick the income account where collected interest is recorded.
5. Pick the tax type (typically VAT 19% if your company is responsible).
6. Save.

Important: verify the legal max rate with your accountant. The Financial Superintendence publishes the usury rate monthly and exceeding it is an infraction.

Apply payment to overdue invoice (example)

Imagine:

• Invoice FV-1024 for $1,190,000 (incl. VAT), due 2026-03-15.
• Customer pays 2026-04-06 (22 days overdue).
• Configured rate: 19.5% annual effective.

Interest calculation:

Interest = Balance × ((1 + rate)^(days/365) - 1)
Interest = 1,190,000 × ((1.195)^(22/365) - 1)
Interest ≈ 12,530

When you confirm the cash receipt:

1. Payment of $1,190,000 is applied to FV-1024 (settled).
2. Invoice FV-1025 is automatically generated for $12,530 + VAT = $14,911.
3. A success notice appears: “Late-interest invoice FV-1025 generated for $14,911”.

The journal entry of the interest invoice is:

DEBIT  130505 — Late-interest receivable    14,911
CREDIT 421005 — Late-interest income        12,530
CREDIT 240810 — VAT charged 19%              2,381

When interest is NOT generated

• The invoice is not overdue at payment time.
• The receipt is applied to an invoice with no due date (cash sale).
• Auto-interest is disabled in settings.
• The customer is marked interest-exempt (field on their contact record).

Notify the customer

The interest invoice can be sent to the customer like any other invoice: email, WhatsApp or customer portal. We recommend doing it at payment time to avoid confusion.

See also

• Price lists