You did the work. You sent the invoice. Six weeks later you are funding someone else's business with your own working capital, and paying interest for the privilege.
Most advice on this stops at "send invoices promptly and offer online payment". Both are true and neither is enough. If your customer's process is to pay on the 45th day, a faster invoice just means they sit on it longer. The levers that move debtor days are structural: when you take payment details, who you extend credit to, what you do on day one of arrears, and whether you keep delivering to someone who has not paid.
The problem is well documented — but check the numbers yourself
A September 2025 survey reported by Accountants Daily (11 September 2025) found late payments to be a productivity drain for Australian companies. The specific figures on the average amount owed and hours lost per month are in that report, and are worth reading at source rather than repeating second-hand.
Around the same date, GoCardless published a Pursuing Payments 2025 report on late payments across Australia and New Zealand (dated approximately 10 September 2025). Worth reading, with one caveat: it is a vendor-commissioned survey and GoCardless sells direct debit. Treat its conclusions about direct debit accordingly.
More recently, reporting dated 12 March 2026 by eCommerce News Australia stated that late payments are pushing Australian small firms into debt. The specific statistics in that piece should be treated as unverified until the underlying data source is checked.
The point is not the statistics. The point is that this is a widespread, structural problem — so it will not be solved by being more assertive on the phone.
Work out what the gap is actually costing you
Before changing anything, put a number on it. Two calculations, both of which take about ten minutes:
Debtor days. Divide your current accounts receivable balance by your annual sales, then multiply by 365. That is roughly how many days of revenue you have parked in other people's businesses.
What a reduction is worth. Take your average daily sales (annual sales divided by 365) and multiply by the number of days you think you could cut. If you turn over $2 million a year, one day of debtor days is about $5,500 of cash. Fifteen days is roughly $82,000 — cash you currently borrow, or forgo, to fund.
Be careful how you value that. Releasing $82,000 of cash is a one-off release of principal, not an $82,000 annual saving. What it buys you is the ability to permanently reduce a facility of that size: at an illustrative 10% cost of funds, that is roughly $8,000 a year of interest you stop paying, plus $82,000 you no longer have to borrow. Use your own facility rate, not the example. Compare that figure against what the collections work will cost you in time and systems — and against your other uses for the cash. Your accountant or bookkeeper can pull these numbers from your ledger quickly.
Change the terms, not just the reminders
The cheapest day to fix a payment problem is before you start work.
- Take payment details up front. For recurring or ongoing work, set up a direct debit mandate at onboarding, before the first invoice. The customer authorises the debit once; you are no longer waiting for someone else to initiate a payment run. For card-on-file arrangements, understand your surcharging obligations and merchant agreement terms before you set this up.
- Deposits. For project work, take a deposit before commencement. It funds the early cost and it filters out customers who were never going to pay.
- Progress claims. Long jobs invoiced at completion are a loan to the customer. Break the job into milestones and invoice on each one. If a milestone claim goes unpaid, you find out early — with limited work at risk — rather than at the end.
- Shorten the stated terms. "30 days from end of month" can mean 60 days in practice. "14 days from invoice date" is a different instruction. Change it on new customers first and see whether anyone objects.
- Put the terms in a signed document. Terms buried in an invoice footer are weak. Terms in a signed engagement letter or credit application are much easier to rely on — though a signature alone does not guarantee enforceability. Terms can still fail because they were not properly incorporated, because they conflict with the customer's purchase order terms, or because a standard-form term is challenged under the unfair contract terms regime. Have a lawyer review them.
Credit-check before you extend trade terms
Extending 30-day terms is a lending decision. Most small businesses make it based on how the first meeting felt.
For any new trade account above a threshold you set, run a credit check through a commercial credit bureau, take trade references, and confirm the exact legal entity you are contracting with — including whether a company or trust is involved and whether directors will provide a personal guarantee. If you use guarantees or retention of title, have a lawyer draft them; the drafting matters and generic templates fail at the point you need them.
New customers who fail the check are not lost. They go on prepayment, deposit or direct debit until they establish a payment record.
Build an escalation ladder with names and dates
Chasing is usually treated as a character trait — "be firm but polite". Make it a process instead, so it happens whether anyone feels like it or not.
Write down a ladder like this and put it in your system:
- Day −3 (before due): automated reminder confirming amount and due date. Owner: automated.
- Day +1: short email. Invoice attached again, payment link included.
- Day +7: phone call to the person who actually approves payment, not the general inbox. Confirm the invoice is approved and in the run, and get a payment date. Note the date in the file.
- Day +14: email from the business owner or finance manager, referencing the promised date and stating that supply will be placed on hold.
- Day +21: supply on hold. Formal letter of demand.
- Day +30: hand to a collections agency or solicitor.
Each step needs a named person and a diarised date. The most valuable step is the day +7 call, because it surfaces the real reason — a disputed line item, a missing purchase order number, the wrong email address — while there is still time.
Stop delivering to non-payers
This is the step most owners avoid, and the one that changes behaviour fastest. Continuing to supply someone who has not paid tells them the terms are decorative.
Make it contractual: your terms should state that supply may be suspended while an account is overdue. Then apply it consistently. Before you suspend, check your contract and get advice if the contract has notice requirements or the customer is significant enough that a dispute would hurt — a lawyer's half-hour here is cheap.
One caveat worth naming: if you have concentration risk — one or two customers making up most of your revenue — you have less leverage than the tactics above assume. Fixing that is a different project, and a more important one.
What to do this week
- Calculate your debtor days and the cash value of a 15-day improvement, using your own cost of funds.
- Pull an aged receivables report and identify the three oldest balances. Call each one and get a payment date.
- Draft your escalation ladder, assign names, and put the steps into your accounting system as scheduled tasks.
- Change your standard terms for new customers: shorter terms, deposit or direct debit mandate at onboarding.
Have your accountant sanity-check the numbers and a lawyer review your terms and any guarantees before you rely on them.
Sources
- Accountants Daily — Late payments a productivity drain for Aussie companies, survey finds
- GoCardless — Pursuing Payments 2025
- eCommerce News Australia — Late payments push Australian small firms into debt