You did the work. You sent the invoice. And now you’re chasing it, again, while wages and the BAS are due on fixed dates whether the customer pays or not. For a lot of growing businesses, slow-paying customers are the main reason cash is tight even in good months.
Here’s the short answer on how to get paid faster: set clear terms before the work starts, invoice the same day the work is done, make paying easy, follow up on a fixed schedule, and track your debtor days every month. Most businesses can cut 10 to 15 days off their collection time without upsetting a single good client.
This guide shows the system we set up with clients as their virtual CFO and bookkeeping team, with a worked example showing how much cash a $6M business can free up.
In short:
- Australian small businesses wait about 23 days on average for an invoice to be paid, according to Xero data, so every day you shave off is cash back in your account.
- Most late payment problems start before the invoice: unclear terms, no deposit and slow invoicing.
- A fixed follow-up schedule, run by your bookkeeper, gets paid faster than the owner chasing when they remember.
- Debtor days is the one number to watch, and for a $6M business each day is worth about $16,000 in cash.
- Good clients rarely mind a clear process. The ones who push back are often the ones you most need it for.
Why are customers paying you late?
Customers usually pay late because nothing in your process makes paying on time the easy option. In our experience, it’s rarely about a client who can’t pay. It’s about unclear terms, invoices that go out late or with errors, and no one following up.
The problem is common. Xero’s Small Business Insights data for the June 2026 quarter shows Australian small businesses took an average of 22.9 days to be paid, and invoices were paid about six days after the due date. The Australian Small Business and Family Enterprise Ombudsman says getting paid by a business customer is still the most common reason small businesses contact it for help.
The usual causes we see:
- Payment terms that were never agreed in writing, so the customer uses their own.
- Invoices sent at month end in a batch, sometimes weeks after the job finished.
- Missing purchase order numbers or wrong details, which gives the customer a reason to sit on it.
- Only one way to pay, usually bank transfer, with no payment link on the invoice.
- No one owns collections, so follow-up happens when the bank balance gets scary.
How do you get paid faster without losing clients?
You get paid faster by fixing the process at each stage, from quote to cash, so that paying on time becomes the default. Here are the seven steps we put in place, in order.
- Agree terms before you start. Put your payment terms in the quote and the signed acceptance. Seven or 14 days is reasonable for most service and trade work. Don’t let a 30-day or end-of-month term creep in without a conversation about price.
- Take deposits and progress payments. For bigger jobs, ask for a deposit to cover materials, then bill at stages. You shouldn’t be funding a customer’s project out of your own overdraft.
- Invoice the same day. Send the invoice when the job or milestone is complete, not at month end. Every day of delay is a day added to your collection time before the clock even starts.
- Make the invoice impossible to dispute. Include the PO number, the site or job reference, a clear description and the due date in bold. For large clients, find out who approves invoices and what they need to see.
- Make paying easy. Add an online payment link (card and bank transfer) to every invoice in Xero. For repeat clients, consider direct debit. Weigh the card fee against the cost of waiting.
- Follow up on a fixed schedule. Set automatic reminders in Xero, then add a personal step: a friendly call or email a few days before the due date, a reminder on the day, and a phone call when it’s seven days overdue.
- Escalate with a clear policy. Decide in advance what happens at 30 and 60 days overdue: a formal letter, a hold on new work, then a dispute or recovery process. Apply it the same way every time.
None of this needs to feel heavy-handed. A clear process actually protects relationships, because the owner isn’t the one making awkward calls about money.
What are debtor days and how do you calculate them?
Debtor days tells you, on average, how many days it takes to turn a sale into cash. It’s the single best number for tracking whether your collections are getting better or worse.
The simple formula is: trade debtors divided by annual sales, multiplied by 365. Use your accounts receivable balance from Xero’s Aged Receivables report and the last 12 months of sales. If you’re registered for GST, your receivables include GST and your sales figure doesn’t, so for a like-for-like number, add GST to sales or remove it from debtors. Pick one method and stick with it.
Track it monthly alongside the aged receivables report. A falling number means your process is working. A rising number is an early warning that shows up well before the bank balance does. For a wider view of why cash and profit don’t move together, read why profitable businesses still run out of cash.
Worked example: how much cash could you free up?
This is an example with realistic numbers to show the method. It isn’t a client case study, and your numbers will differ.
A Geelong-based electrical contractor turns over $6M a year. Its trade debtors sit at $900,000. That gives debtor days of 55 ($900,000 divided by $6M, multiplied by 365).
The owner’s payment terms are 14 days, so on average customers are paying more than a month late. Here’s what the business changed over two quarters:
- Deposits of 20% on all jobs over $20,000.
- Progress claims on every job longer than two weeks, instead of one invoice at the end.
- Invoices sent from the field the day the job is signed off.
- Payment links on every invoice, plus a weekly debtors call run by the bookkeeper.
| Measure | Before | After |
|---|---|---|
| Annual revenue | $6,000,000 | $6,000,000 |
| Debtor days | 55 | 40 |
| Trade debtors | $900,000 | about $657,500 |
| Cash freed up | about $242,500 |
That’s roughly $242,500 back in the bank, with no new sales, no new loan and no price rise. Put another way, at $6M of revenue each day of debtor days is worth about $16,400 in cash.
It also saves money. If that $242,500 had been sitting on an overdraft at, say, 9% interest, that’s around $21,800 a year in interest the business no longer pays. Check your own facility rate, as rates vary.
The cash freed up is a one-off release, but it stays freed as long as the process holds. That’s why the weekly routine matters more than the first big clean-up.
How should you chase overdue invoices?
Chase overdue invoices with a written schedule, a named person who owns it, and a firm but friendly tone. Consistency does most of the work.
A schedule that works for most B2B businesses:
| When | Action | Who |
|---|---|---|
| 3 days before due | Friendly reminder email with the payment link | Automatic from Xero |
| Due date | Reminder that payment is due today | Automatic from Xero |
| 7 days overdue | Phone call to the person who approves payments | Bookkeeper |
| 14 days overdue | Second call and written reminder of your terms | Bookkeeper |
| 30 days overdue | Formal letter, hold on new work | Owner signs off |
| 60 days overdue | Dispute resolution or debt recovery | Owner with adviser |
A phone call usually beats a third email. Ask a simple question: “Is there anything stopping this invoice being paid?” You’ll often find a missing PO number or an invoice sitting in the wrong inbox.
If a dispute gets stuck, Victorian businesses can contact the Victorian Small Business Commission, which lists a supplier not paying on time as a dispute it can help with. Preliminary help is free and mediation costs each party $300, though the VSBC notes waiting periods can be long. Builders and trades may also have rights under the Building and Construction Industry Security of Payment Act, so get advice on how it applies to your contracts.
Who should own collections in your business?
Your bookkeeper should run collections each week, and the owner should only step in at the escalation points. When the owner chases every invoice, it gets done late, inconsistently and with more emotion than it needs.
Here’s how the work usually splits in an outsourced finance team:
- Bookkeeper: sends invoices promptly, sets up reminders, makes the follow-up calls and keeps the aged receivables report clean.
- Virtual CFO: sets the terms and credit policy, reports debtor days monthly, and builds the effect of collections into your cash flow forecast.
- Owner: approves credit for big new customers and makes the call on holds and recovery.
This is the difference between a reactive and a proactive accountant. One tells you at year end that debtors were high. The other helps you fix it this month.
An accountant shows you what already happened. A CFO shows you what to do next.
Once collections are steady, put the expected receipts into a rolling forecast so you can see your bank balance weeks ahead. Our guide to building a 13-week cash flow forecast shows how. Across our clients we’ve seen an average 17% lift in cash flow and 29% lift in profit (results vary), and tighter collections are often one of the first wins.
Common questions
Should I charge interest on overdue invoices?
You can, as long as it’s in your written terms and the customer agreed to them before the work started. In practice, most businesses use it as a deterrent rather than something they collect. A clear process and a hold on new work usually gets better results than an interest charge.
Will asking for a deposit cost me work?
Occasionally, but rarely with the customers you want. Deposits are normal for trade, construction and project work, and serious clients expect them. If a customer won’t pay a deposit on a large job, that tells you something about how they’ll pay the final invoice.
Is offering an early payment discount worth it?
Sometimes, but do the maths first. A 2% discount for payment within seven days costs 2% of the invoice, which can be more than your overdraft interest for the same period. It’s usually better to fix terms and follow-up before you start giving margin away.
Can I stop work for a client who hasn’t paid?
Often yes, if your contract allows it, but check your terms and get advice first, especially on construction contracts. The safer path is to write a hold on new work into your terms upfront, so it’s a process you follow rather than a threat you make.
Want to get paid faster, every month?
We set up the terms, the Xero reminders and the weekly debtors routine, then track debtor days with you each month so the cash stays in your account. Book a free call to talk it through, or see our bookkeeping packages and virtual CFO packages. If you’d like to start on your own, grab our free Excel template, Run your business with Complete Financial Clarity.
Related reading
This article is general information only and doesn’t take your circumstances into account. Speak with a qualified adviser before making decisions.
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