Chasing unpaid invoices without losing customers

Late payment is a cash flow problem

Most cash flow gaps in business-to-business work trace back to customers paying late. Every day an invoice sits unpaid, you are effectively lending to your customer at no charge. Chasing politely and consistently is not rude; it is basic business, and most customers respond to a clear process.

Prevent late payment from the start

Agree payment terms in writing before work starts: due dates, deposits, progress payments and any late payment charges. Make sure invoices go to the right person with the right purchase order number. Offer easy ways to pay. For larger jobs, ask for a deposit and progress payments rather than one invoice at the end.

Invoice immediately

Send invoices the day the work is done or goods are delivered, not at the end of the month. Every day of delay pushes payment back. Accounting software can automate this and track due dates.

A simple reminder process

A courteous reminder a few days before the due date. A follow-up the day after it falls due. A phone call a week later to ask if there is a problem with the invoice. A firmer written reminder after two to three weeks, referring to your terms. Keep notes of every contact. Most overdue invoices are paid at the first or second step.

When customers cannot pay

Sometimes customers are struggling themselves. A short payment plan agreed in writing can be better than a stand-off. Get the plan in writing and stick to the follow-up schedule.

Escalating

If a customer still does not pay, options include a formal letter of demand, using small business support services or a commissioner in your state to help resolve a dispute, or legal action for larger amounts. business.gov.au has guidance on what to do when you have not been paid. Consider the cost and the relationship before escalating.

Leverage with large customers

Large businesses are required to report how quickly they pay small business suppliers. That information can help when negotiating terms or raising concerns about slow payment.

Fund the gap while you collect

If slow payment is structural, for example your industry runs on 60-day terms, chasing alone will not close the gap. Invoice finance releases cash from invoices owed by creditworthy business customers. A line of credit covers gaps that come and go. Our guide to invoice finance explains how it works.

An illustrative example

A cleaning contractor’s average customer took far longer to pay than the agreed terms. The owner moved to invoicing on completion, added a reminder before each due date and a call the day after, and offered online payment links. Average payment times fell noticeably within three months, and the business no longer needed its overdraft every month.

Scripts that work

A friendly pre-due reminder can be as simple as: “Just a heads-up that invoice 1234 is due on Friday. Let us know if you need anything from us.” After the due date: “Invoice 1234 was due on Friday and we have not seen payment yet. Could you confirm when it is scheduled?” A phone call adds: “Is there anything holding up payment on our side?” Polite, specific and focused on getting a date usually works better than anything stern. Record every promised date and follow up the day after it passes.

Know who pays

In larger organisations, the person who ordered the work is rarely the person who pays. Find out who processes accounts, what they need on an invoice and when payment runs happen. Getting onto the right payment run can bring payment forward by weeks.

Need help bridging slow payers?

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