Automatic late fees on overdue invoices

> Cost: Paid. Paidnice Essentials is $69/month (monthly, no contract) plus SMS per text. First 20 actions free.

Honest note: this is rules automation (if an invoice is X days overdue, do Y), not AI. The case is published by Paidnice. Before, 80–90% of the firm's payments were late; it says late payments then "dropped 70%" and "over 60%" are now paid on time. Those two figures don't line up neatly, so read them as "a big improvement", not an exact number. Late fees only work if your contracts or terms allow them.

Prerequisites

• A Xero organisation with your customer invoices in it (Paidnice also works with QuickBooks Online).
• Admin access to Xero so you can approve the connection.
• Your payment terms, and any late-fee wording, already in your invoices or contracts. Late fees need a legal basis, so check with your accountant.
• Customers' email addresses (and mobile numbers if you want SMS) in Xero.

Step-by-step setup

Step 1. Connect Xero. Sign up at paidnice.com (email, or log in with Xero), click Xero and approve the connection. Paidnice drafts starter policies, but nothing sends until you approve. All customers start in the Default Group.

Step 2. Make customer groups. Create a group for each kind of relationship, for example "Long-term contracts", "Month-to-month" and "New clients". On the Contacts tab, tick customers and use Move Contacts to Group. Each group gets its own policies.

Step 3. Add the late-fee policy. Open a group, choose Add new policy → Invoice Late Charge. Pick a fixed fee, a percentage or annual interest. Set a grace period (Paidnice suggests 3–7 days), choose one-off or recurring, and choose add to a new invoice so the fee appears as its own invoice in Xero.

Step 4. Add email reminders. In the group click Add New Automation Policy → Email. Name it, choose when it sends (for example 3 days before due, on the due date, and 7 days after), pick a template and set the Action time (9:00) on weekdays only. Mention the late fee in the reminder before it applies.

Step 5. Add SMS as a second channel. In the group click SMS Alert, name it and choose when it sends (before, on or after the due date). Use merge tags like {{{InvoicePortalLink}}} so the customer can pay from the text and {{{ForecastPenaltyAmount}}} to show the fee that's coming. Under More Options, set the Action time and default country code, and set a monthly SMS cap.

Step 6. Turn off Xero's own reminders. If Xero reminders are on as well, customers get two sets. Switch Xero's off.

Step 7. Test, then go live. Put a test contact with your own email and phone on a small overdue invoice. Use action now to send the SMS immediately, check every message, then set the policies to Active.

Easier: let your AI do it

On the Pro plan (from $99/month) Paidnice has an official MCP server. That's a secure plug that lets an AI chat such as Claude or ChatGPT read your Paidnice data.

1. In Paidnice, go to Settings → Advanced → API & MCP → Connect an agent (MCP) and copy the address https://api.paidnice.com/mcp.
2. In Claude, open Customize → Connectors, click +, then Add custom connector. Name it Paidnice, paste the address and click Add (Claude's free plan allows one custom connector). ChatGPT needs a paid plan with developer mode turned on.
3. Sign in to Paidnice when asked, pick your organisation, and choose Read (safest) or Read and Write.

Today it can read customer replies, contacts and invoices, and update contact people. Sending reminders and building policies by chat are still in beta. Try: "Which customers replied to reminders this week, and what did they say?" You can revoke access any time under API & MCP.

What success looks like

Most invoices are paid within 14 days, the late-fee invoices pay for the subscription, and nobody on your team has to make "just checking in" calls. Customers who are struggling call you first.

Common issues & fixes

• A good client got a late fee: waive it under Completed Actions → Remove late fee, and move them to a gentler group.
• Customers got two reminders: Xero's built-in reminders are still on.
• SMS didn't send: the mobile number is missing or in the wrong format in Xero. Set the default country code.

Optional: Maintenance

• Monthly: review the dashboard's overdue totals and waived fees.
• Quarterly: check your groups still match how you treat each client.

Copy-paste prompt

I run a [type of service] business and invoice clients monthly on [NUMBER]-day terms. My contracts say: [PASTE LATE FEE CLAUSE, or "none yet"].
Write:
1. A friendly reminder email for 3 days before the due date (under 80 words).
2. An overdue email for 7 days after, mentioning a late fee of [AMOUNT] after [NUMBER] more days (under 90 words).
3. Two SMS reminders under 160 characters each, with a placeholder for the payment link.
Keep the tone firm but warm. Don't promise anything my terms don't say.

Sources

• Case: Paidnice success story (managed IT provider, South Africa). Credit: the firm's team (vendor-published).
• Paidnice Help: Quick start
• Paidnice Help: Creating workflows with groups and policies
• Paidnice Help: Late fees and interest
• Paidnice Help: Sending email reminders (advanced)
• Paidnice Help: Sending SMS reminders
• Paidnice: AI agents (MCP)
• Paidnice pricing