I have an agreement signed that I can charge 1.5% for each month the client has not paid.
Say I sent out an invoice Jan 1 for $1000 and they haven't paid. Payment is due Feb 1.
On Feb 2, I want to send another statement saying that they now owe me $1015. (Is Feb 2 the right day? Could I do it evening on the 1st, or should I give a small grace period in case the check was post-marked the 1st or something?)
How do I account for adding interest in my books? (I am using Xero if that's relevant.)
As easy as it would be to edit the first invoice and resend it, that doesn't sound "right".
Should I instead credit the first invoice to the client's account and create a new invoice for the original amount + interest ($1015)?
What is the appropriate way to handle this situation following standard business accounting procedures?