Customers paying late: how to keep going while you wait

You did the job, sent the invoice and kept your side of the deal. Thirty days came and went. So did forty-five. In the meantime you paid wages, bought materials and covered the BAS from your own account. Late payment is one of the most common reasons good businesses run short of cash, and it is almost never your fault. It is still your problem.

Why does late payment hurt so much?

Because every extra day of waiting is a day you fund your customer’s business for free. If your costs run at $800 a day and a customer is 20 days late, that is $16,000 of your money in their pocket. Multiply across several customers and you have a serious gap.

The effect shows up in the number we call days to get paid: the typical time between sending an invoice and receiving the money. It is the single largest driver of your working-capital gap. Our guide on days to get paid explains how to measure it, and the Dough gap calculator converts it into dollars.

What should I do first when an invoice goes overdue?

Business.gov.au sets out a staged approach:

1. Check your contract. Confirm the due date, payment method and late-payment terms. If the agreement was verbal, gather supporting emails or texts.
2. Send a reminder. Ask for payment, agree a new date or set up a payment schedule.
3. Send a letter of demand. You can write it yourself or ask a legal professional.
4. Try dispute resolution. Low-cost services or an accredited mediator can help reach an agreement.
5. Use a debt collector. Tell the customer first, which can prompt payment on its own.
6. Take legal action. Seek legal advice or lodge a claim with a small claims tribunal. It can be effective but costly and slow.

Start at step one on the first day an invoice is late. Most debts are settled with a polite message.

How do I stop it happening again?

Prevention is cheaper than collection. Business.gov.au recommends the following.

• Write clear payment terms into invoices and contracts: due date, methods, credit conditions and what happens when payment is overdue.
• Check customers before extending credit, and cap credit limits.
• Ask for deposits or part-payment upfront on larger jobs.
• Invoice promptly, automated if possible.
• Offer early-payment discounts where the maths works.

The same page notes that credit is common in business-to-business sales but adds cash flow risk if customers pay late or not at all.

How can funding bridge the wait?

When the invoices are real and the customers are good for it, a short bridge can make sense. For trading businesses, unsecured funding is typically $5,000 to $500,000, sized on turnover and bank statements. Three shapes fit:

• A short-term loan sized to the outstanding invoices (details).
• A line of credit if the delay is a permanent feature of your trade (details).
• A working-capital loan if the wait is long and the gap larger (details).

Business.gov.au also lists invoice factoring, noting it is fast but can be expensive. Whether it suits depends on your customers, your margins and how you feel about a third party being involved in collecting.

What do lenders want to see?

Evidence that the invoices exist and the customers are creditworthy. Helpful items include:

• an aged-debtors list showing who owes what and for how long;
• copies of the larger outstanding invoices or contracts;
• bank statements showing past payments from the same customers;
• a short explanation of why payment is late.

If the debtor is a large, reliable organisation that simply pays slowly, say so. If the debtor is a one-off dispute, be upfront about that too.

When is borrowing the wrong answer?

If the invoices will never be paid, a loan only delays the pain. If one customer owes most of your turnover, you have a concentration risk to manage, not just a timing gap. And if the cause is a quality dispute, resolve that first. In those cases, speak to your accountant before taking on repayments.

What does a tidy chase routine look like?

The best credit controllers are boring and consistent. A routine that works for many small businesses:

• Day 0: invoice goes out, with the due date and payment methods in plain sight.
• Day before due: a short friendly reminder for larger invoices.
• Day 1 overdue: a polite message asking whether anything is holding things up.
• Day 7 overdue: a phone call, because voices work better than emails.
• Day 14 overdue: a written follow-up with a firm date, and a note that further action will follow.
• Day 30 overdue: a letter of demand, and a pause on further work for that customer.

Keep a record of every contact. If the matter goes further, a dated trail of reasonable attempts matters a great deal. And do it consistently: customers learn quickly which suppliers chase and which do not.

Next step

If you’re waiting on invoices and the bills won’t wait, tell us about it. Share the amount outstanding, the age of the debts, the cash you need and the date. A lending specialist reads your enquiry and calls you. There is no credit check just to ask, and your details are not hurled at a long list of lenders.

Real debtor figures and real dates make the first call efficient. See if you qualify and get paid for waiting.