Cashflow is the lifeblood of any small business and slow paying debtors are a common frustration that cause undue stress. This is something I see all the time and it is the low hanging fruit of improving your business cashflow. Just takes a little discipline.

If your terms of business are say 30 days (meaning a client has 30 days to pay your invoice) but on average they are ACTUALLY being paid in 60 days.

That’s a clear sign you are letting your clients take you for a ride.

In this example you are allowing your clients to have an extra 30 days to pay you whilst you are still paying your bills on time (and as you know we have plenty of bills to pay). Think of it like giving your clients a 30 days interest free loan after the due date of their invoice. That doesn’t sound fair.

If you don’t understand an Aged Receivables Report ask your accountant to help, this will expose those late payers and how long overdue their debts are.

There is usually a lack of control around debtors and enforcement of the rules. So what are your options to reel in overdue debts?

  1.  Run a list of outstanding debtors and jump on the phone. The quickest and easiest way to start is civilly. Say something like  “Hey, if you are busy as I am you’ve probably overlooked our invoice. Any chase you could address by close of business tomorrow? I’ll email through now so it’s at the top of your inbox.”
  2. If no luck send a second email with a little more tone.  “Cashflow is the lifeblood of small business and interruptions cause us to really feel the pinch. I’ve attached our invoice again.”
  3. The above should get a few invoices in the door, for those not actioning stop work immediately on their file and let them know that you can’t tolerate late payment, they need to bring their account up to date and going forth all invoices need to be paid on time. Remember it’s your business and your rules.
  4. The next step is a final demand. This is their last straw to pay. Remind them of all the previous follow ups and lack of action then advise: “Accordingly we advise that if payment in the sum of (amount outstanding) is not received by this office within seven days of the date of this letter, we will instruct our solicitor to issue proceedings against you, to recover the unpaid debt together with our legal costs.”
  5. From here you can file a case with your state based Civil and Administrative Tribunal (e.g. in QLD it is QCAT). There are usually restrictions around the amount of the invoice and the application fee will vary also based on this amount so first step would be to enquire to hear your options. If lodged the debtor will receive a copy of the application and a notice of the hearing date. This usually scares them to pay up as they don’t have the time to attend a hearing and/or feel like they don’t stand a chance. If they do pay you can then withdraw the application.
  6. Another option is to engage a Debt Collection Agency who will take over the debt chasing for you and if recovered will take a percentage. Or you could hand to your lawyer but be prepared for their fees. In either case get very clear upfront on the costs and weigh up against the invoice amount.

The above is not an ideal scenario but those tips should help getting a few debts in the door to help you cashflow your business. You’d be surprised how just a quick call can prompt someone that’s honestly forgotten and will pull out their credit card over the phone.


Let’s now have a look at prevention and what you can do to keep your clients in line:

  • If you are using Xero you can setup invoice reminders. This is essentially a series of emails that go out reminding your clients of their invoice. So for example you could have the first email go one day before the invoice is due as a friendly reminder. Another more direct email could go a few days after the due date.
  • Can you price your jobs upfront and ask for all of or a percentage of the invoice to be paid before work starts. Don’t prejudge what your clients will say, you might be surprised they are happy to abide by your new policy.
  • Give your clients multiple payment options. Don’t just say we take cash, ensure you can take EFT, credit card, cheque, direct debit/credit.
  • When you take on new clients be very clear “this is how we work”. You are then setting their expectations that there is zero tolerance for late payment.
  • If they are repeat offenders you need to back yourself and fire them. Don’t buy into the fact that you need the money because they aren’t paying you anyway. Free up the capacity to bring on A class clients. As a small business owner you have a million things to worry about let alone a client who shows you no respective.

I’d be curious to hear if the above works for you or if you have any additional ninja tactics to reel in debts?

Brad Turville

Brad Turville

Director @ BJT Financial | Helping private businesses fast track their business growth through big firm expertise and boutique firm service.