4 ways to deal with chronic late payers

Do you find it difficult to manage working capital when payments are delayed? Of course you do and you’re not alone.

The Digital Financial Analytics (DFA) Small and Medium Business Survey revealed that 57 per cent of all SME borrowing this year was dedicated to managing working capital. 

The research also found that delayed payments were the main driver of working capital borrowing and that the average repayment term now runs on a 50-60 day cycle.

Although long repayment cycles are now the norm, they weren’t always. During the GFC larger businesses looked for ways to improve working capital by extending payment terms with their suppliers. Small business owners were often reluctant to challenge large clients, not wanting to risk losing business and as a result, 50-60 day payments cycles became the new normal.

A working capital loan can be crucial, particularly when dealing with delayed payments but small business owners also need to be tough and call out chronic late payers. Here are four simple things you can do to keep late payments to a minimum:


Automated invoicing ensures you never miss billing someone for the work you do. Did you know your accounting software can probably do it for you? Or you can download an app to help you  – be sure to pick a solution with a one-click payment option. This means your client will receive the invoice, click a link and pay using stored credit card information. It’s that easy!

If you have a number of recurring clients, why not ask them to agree to automatic, recurring billing? Once you have them on board a service like PayPal can take care of the rest. Each month, PayPal will charge your client’s credit card and deposit the funds in your account – simple and seamless.

Work the price

Ever considered offering an early payment discount? This could help ensure you receive payments on time. Assess the situation and consider what is common practice in your industry. If competitors are offering discounts, it makes sense to do so too.

Be wary – discounts cost you money and oftentimes clients will take the discount and continue to pay you late. Be sure to document the terms of the agreement in an email or a formal contract – always get it in writing!

Set a policy

Ideally you want to implement a policy that requires clients to make the full payment upfront. This means work won’t commence until payments have cleared. Sound tough? It is and it may even deter some clients – but they’re probably the kind you don’t want to deal with. This policy can minimise stress, eliminate the money-chasing game and establish trust on both sides.

Of course, it’s not for everyone. If you’re not ready to commit to upfront payments, outline clear policies about how late payments will be handled, what charges will be incurred and when. Again, always get it in writing!

Respect yourself and your service

You’re providing a necessary, valuable service and are likely to have a competitive advantage over other suppliers. You might be cheaper, more efficient, provide a quality product or have a long standing relationship with your customers. Don’t assume you’re at their mercy – they will have a hard time replacing you.



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