Quick answer
To get customers to pay faster, invoice immediately with complete details, make paying easy with payment links and clear bank details, send a friendly reminder before the due date and follow up promptly after it, call about anything more than a week overdue, and take deposits on larger jobs. A consistent, polite routine usually reduces debtor days noticeably within a few months.
Key points
- Invoice immediately with every detail the customer needs.
- Make paying easy with links and clear details.
- Remind before the due date, follow up after it.
- Consistency matters more than firmness.
Every day a customer takes to pay is a day your business funds their purchase. For many small businesses, cutting debtor days is the single biggest cash flow improvement available, and it costs nothing but a little discipline. This guide sets out a practical collections routine you can start this week, from the invoice itself to reminder timing, phone scripts and when to escalate.
Start at the invoice
Most late payment begins with the invoice itself. A complete, accurate invoice gets paid; an incomplete one gets queried and parked.
- Send it immediately when work is delivered or a milestone is reached.
- Address it correctly: the right legal name, ABN and contact person.
- Include any purchase order or reference number the customer requires.
- Describe the work clearly so the approver knows what it is for.
- State the due date as a date, not just “30 days”.
- Include payment details and a payment link.
If your customer has an accounts payable process, ask what they need to approve and pay invoices quickly, and give it to them every time.
Make paying easy
Remove every obstacle between the customer and payment. Offer bank transfer with clear details, card payment through a link and, if your customers prefer it, direct debit for regular services. Accounting software can add payment links automatically. The easier it is to pay, the sooner people do, and the fewer reminders you will need to send.
A simple reminder schedule
Consistency beats firmness. A schedule many businesses use:
- Three days before due: a friendly heads-up that the invoice is due soon, with the payment link.
- On or the day after due: a short note that payment is now due.
- Seven days overdue: a polite follow-up asking when payment can be expected.
- Fourteen days overdue: a phone call to the person responsible for paying.
- Thirty days overdue: a formal letter outlining the amount, the due date and next steps.
Most accounting software can automate the first three steps. The phone call is where most problems are solved.
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What to say on the phone
Keep it friendly and practical: “Hi, I am calling about invoice 1042 for $6,800, which was due last Tuesday. Can you let me know when it is scheduled for payment, or whether there is anything you need from us?” Then listen. Often the answer is a missing detail, a lost email or an approval waiting on someone. Fix it on the spot and confirm the payment date.
Deposits and progress payments
For larger or custom jobs, ask for a deposit before starting. For longer projects, bill at stages that match your costs. Both reduce how much you fund and how long you wait. Our guide to setting payment terms covers wording.
Shorter terms
If you still offer 30-day terms by default, consider 14 days for new customers. For many small business transactions it is reasonable and widely accepted. Review terms for existing customers when you update prices.
Know your customers’ track records
Before extending large amounts of credit to a big business, check its payment record. The Payment Times Reporting Scheme publishes how long large businesses take to pay small suppliers. For smaller customers, trade references or a small first order on shorter terms can help.
Disputes: fix them fast
Disputed invoices are often the longest outstanding. Resolve disputes quickly, ideally by phone, and record what was agreed. If disputes keep happening, look at the cause: unclear quotes, scope creep or delivery issues. Fixing the cause prevents future delays.
Incentives and late fees
Some businesses offer a small discount for early payment; others charge late fees. Both can work if clearly set out in your terms before work starts. Compare any discount with the cost of waiting or funding the gap. Apply late fees consistently, but use judgement with valued customers.
When to escalate
If an invoice remains unpaid despite reminders and calls, business.gov.au outlines next steps, from a formal letter of demand to dispute resolution. The Australian Small Business and Family Enterprise Ombudsman can help small businesses with disputes. For larger amounts, legal advice may be worthwhile. Stop supplying customers who will not pay until the account is settled.
Measure your progress
Track your average debtor days monthly. If they are falling, the routine is working. If one customer keeps blowing out, address it directly. Small improvements add up: shaving ten days off debtor days can release a large amount of cash for a growing business. The working capital calculator shows how much.
Who should do the chasing
In many small businesses, the owner chases invoices, which means it happens only when there is time, which is rarely. If possible, give collections to one person, such as a bookkeeper or office manager, with a clear schedule and authority to follow up. Customers respond better to a consistent contact, and the owner is freed to focus on the work. If you do the chasing yourself, block out the same half hour each week for it and treat it as non-negotiable.
Bridging the gap while you improve
A better collections routine takes a few months to show its full effect. In the meantime, if late payers are squeezing cash flow, invoice finance or a line of credit can bridge the wait. See slow-paying customers for more.
Recurring billing and direct debit
If you provide ongoing services, such as maintenance, cleaning, IT support or memberships, recurring billing with direct debit or stored card payment can remove late payment almost entirely. Customers authorise payments once, and you collect automatically on the agreed date. Many accounting and payment platforms support this. It suits steady, predictable services best; for project work, combine deposits and milestone billing instead. Moving even a portion of your customers to automatic payment smooths cash flow and frees up time otherwise spent chasing.
An illustrative example
An illustrative IT support business had average debtor days of about 48 on 30-day terms. It began invoicing on the day work was completed, added payment links, automated reminders and introduced a fortnightly call list for overdue accounts. Within three months, debtor days fell to around 31, releasing enough cash to clear its line of credit balance.
Get paid sooner, stress less
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Frequently asked questions
When should I send a payment reminder?
A few days before the due date, on the due date or the day after, and again a week later. Then call.
Is it rude to chase customers for payment?
No. A polite, professional reminder is normal business practice. Most customers appreciate clear communication.
Should I charge late fees?
Only if they are clearly set out in your terms before the work begins. Apply them consistently, and consider customer relationships.
What if a customer disputes an invoice?
Resolve the dispute quickly, ideally by phone. Disputed invoices are often the longest outstanding. Fix the cause so it does not recur.
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