What to do when customers don’t pay on time

You should try to do your best to make sure you get paid on time by putting some effort into the invoice and the process you have for payments. Modern accounting software such as XERO (our favourite), MYOB, Quickbooks and the like, do a good job of tracking invoices and payment.

It’s a good idea to be very regular about invoices and reminder invoices. Sometimes, just to be nice, you might allow some leeway to a customer. Every situation and business is different but generally this is not a good idea. If you do it once you may well be expected to do it all the time.

If that doesn’t work – then what can you do to get late paying customers to cough up money?

Have a pre-prepared late notice and send it off at a set time. If you use online accounting software you can use it to send late notices out for you. You might just send the original invoice with “payment past due” on it or (a much better option), you might have a short, polite and carefully laid out email with the original invoice attached.

Make sure it clearly lays out what invoice is being referred to and what that invoice relates to. If you know who is paying the invoice have it go directly to them.

If the customer has a few outstanding invoices then summarise them all in the one email and follow that up with a phone call (a “statement of accounts”).


The bottom line is that businesses that chase up payments by calling up late paying customers get paid. Be polite, don’t get emotional, let them do all the talking and don’t let them go until they have told you exactly when you will be paid. Make sure they are explicitly aware of the exact amount owed.

What to do if all else fails?

You can charge late fees but if you do that the customer needs to be told about it beforehand. Also make sure all your invoices say that you will charge a late fee. The best way to do this is to show the amount owed on the due date – and then the total due AFTER the due date on every single invoice.

If you don’t want to ruffle feathers, you can offer to waive the late fee on your first “payment overdue” notice so long as it’s paid immediately and strongly imply you won’t be doing this twice.

Getting serious

The next step is the “hand grenade” tactic of refusing to provide more goods or services until you are paid. But be prepared for some customers getting offended by this. You might also lose that customer. But it’s not right that you don’t get the money you deserve.

Use a debt collector

Debt collectors take a percentage of the payment – so you won’t get all your money. However, something is better than nothing. But you will probably never see that customer again.

Get a lawyer

This can get messy and expensive and the type of legal action you can actually take depends on a lot of factors. Use a lawyer that specialises in this field if you feel this is the way to go. Do not get emotional. Sit down and work out how much this will cost you and how much you will recover. Sometimes the wisest course is to just give up.

What if I never get paid?

If worse comes to worse, you can at least write it off as a loss on your bookkeeping accounts and then make sure you claim back any tax losses. Your accountant will be able to help you with this.

Talk to us on 1300 268 800!