What can I do when customers pay invoices late?

Late payments are one of the most common causes of cash flow strain. Most of the fix sits inside your own business: clear terms, prompt invoices and a routine you follow every time. Finance comes last, and only if slow payment is a regular timing gap rather than a problem customer.

Set clear payment terms

business.gov.au describes payment terms as the rules your business sets for how and when customers must pay. Put them in your quotes, contracts and every invoice. Cover:

• When payment is due, for example upfront, on delivery, in instalments, or within a set number of days. business.gov.au notes that business-to-business terms are often 7, 14, 21 or 31 days.
• How customers can pay, such as bank transfer or card.
• Whether you offer credit and on what conditions.
• What happens if they pay late, including your collection process.

Before offering credit, business.gov.au suggests running a credit check on the customer and setting a limit on how much credit you offer. For large or custom jobs, a deposit or progress payments reduce how much you have at risk.

Invoice promptly and accurately

Many late payments start with an invoice problem. business.gov.au suggests sending the invoice at the time the customer buys, and invoicing on a regular schedule so customers know when to expect it.

• Include your business name, ABN, a unique invoice number, the date, what you supplied, the price, your payment terms and how to pay. If you are registered for GST, a tax invoice has its own requirements, which business.gov.au sets out.
• Check the invoice matches the purchase order and delivery records before you send it, as ASBFEO suggests. ASBFEO also notes that eInvoicing can reduce errors.
• Confirm the customer has received it. ASBFEO suggests checking where the invoice is in the customer’s approval process about ten days before it is due.
• Consider eInvoicing through your accounting software. business.gov.au notes many packages now offer secure eInvoicing between businesses using the Peppol network.

Step by step: a collection process

Decide your process once, write it down and follow it every time. A simple version:

1. Before the due date. Confirm the invoice was received and approved.
2. The day after the due date. Send a polite reminder by email or phone.
3. About a week overdue. Call the person in the customer’s accounts team. Ask what is holding up payment and agree a date. Confirm it in writing.
4. Two to three weeks overdue. Send a firmer written reminder. If your terms allow it, say you may pause further supply or apply late fees.
5. If still unpaid. Review your contract and records, then send a letter of demand. business.gov.au has guidance on writing one.
6. If there is a dispute. Use ASBFEO’s online Dispute Support tool to find a low-cost way to resolve it, such as mediation.
7. As a later step. Consider a debt collection agency or a small claims tribunal or court. business.gov.au warns that legal action can be costly, stressful and time-consuming.

Keep notes of every call and copies of every message. They matter if the dispute goes further.

The Payment Times Reporting Scheme

The Payment Times Reporting Scheme requires reporting entities, mostly large businesses and some government enterprises, to report on how they pay their small business suppliers. They report every six months on their standard payment terms, actual payment times and use of supply chain finance. The Payment Times Reporting Regulator runs the scheme.

Reports appear on the public Payment Times Reports Register. It is free and needs no account. You can use it to:

• check how a current or prospective large customer pays small suppliers before you agree terms
• see whether the business is on the Fast Small Business Payer List, launched on 2 February 2026, which recognises large businesses that consistently pay small business suppliers in 20 days or less.

The scheme is about transparency. It does not chase individual invoices for you. To complain about a large business’s payment times to your small business, the scheme directs you to ASBFEO.

Getting help from ASBFEO

The Australian Small Business and Family Enterprise Ombudsman helps small businesses in dispute with other businesses or Commonwealth agencies. It can give information, point you to low-cost legal advice and alternative dispute resolution, or refer you to a better-placed agency. Call the information line on 1300 650 460 or lodge a request through the ASBFEO website.

Where invoice finance fits

If your terms and processes are sound but you still wait 30 to 90 days for reliable business customers to pay, the gap is about timing. Invoice finance is one way to bridge it. A provider advances part of the value of your unpaid invoices and pays the balance, less fees, when your customer pays.

It can suit a growing business with creditworthy business or government customers. It is less useful when:

• the problem is one customer who won’t pay, or a dispute about the work
• your margins are thin, because the fees come out of them
• a few customers make up most of your sales, which providers may treat as a higher risk.

Read what is invoice finance? and our comparison of invoice finance, debtor finance and factoring. When you’re ready, you can compare invoice finance and debtor finance.

Important things to know

• Your terms only work if they are agreed. Late fees or pausing supply need to be in your terms before the work starts.
• Collecting debts has rules. business.gov.au notes there are obligations businesses must follow when collecting debts and points to guidance from the ACCC.
• Chase early. A reminder the day after the due date is part of normal business. Waiting weeks makes it harder.
• Know your concentration risk. If one customer owes a large share of your receivables, a delay from them can hit your ability to pay your own bills. See cash flow warning signs.
• Finance has a cost. Invoice finance fees reduce your margin on each sale. Compare the total cost over a typical month with the benefit of getting paid sooner.