4 ways to deal with chronic late payers

Late payers

Finding it difficult to deal with working capital when payments are delayed? The whole SME sector are feeling the strain of late paying clients and customers and struggling with cash flow issues.

The recent Digital Financial Analytics (DFA) Small and Medium Business Survey revealed that 57 percent of all SME borrowing was dedicated to managing working capital. This research also revealed that delays in 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 repayments cycles are now the norm, they weren’t always. It is only until the start of the digital age that delayed payments could be made. During the GFC, larger businesses wanted to create more favourable credit terms by extending the time required to pay. 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 a necessary step to deal with chronic late players and keep cash flow coming into your business. Here are four simple strategies to help you keep late payments down and cash flow up.



Automated invoicing ensures on time, accurate and quick billing for the work you have done. If you run accounting software, it probably has the functionality to offer this as a feature! If not, there are plenty of apps downloadable to your computer or phone that will help with this step. Using one-click payment apps help with the ease and access of payments, ultimately making this step quicker.

If you have a number of recurring clients, why not ask them to agree to automatic, recurring billing? This streamlines processes for the regular clients and also establishes a solid amount of income that you and your business can regularly rely and pull on when required.

Work the price


In order to get people paying earlier rather than later, have you ever considered an early payment discount? A lot of gas and electrical companies do this to keep payments coming in on time. Although, you should assess what is considered common practice and if this would be welcomed in your industry.

Be wary – discount cost you money and oftentimes clients will still opt to pay you late. Be sure to document the the terms of the agreement in writing before it is handed onto the client.

Set a policy


Policies can be a tough thing to implement, especially when they have strict guidelines and rules that clients need to adhere by. An option is to set a policy that requires clients to pay up front for the service or product. Harsh? Yes. But effective? Even more so.

The problem is that this may deter clients, however, if this is the case, then you probably don’t want to deal with clients like this. Once again, it is good to consider your operations and if this is something that is suitable to your business.

Respect yourself and your service


You’re providing a necessary, valuable service and are likely to have a competitive advantage over other suppliers. Whether you are more efficient, produce a better quality service or product or have great relationships in the industry and with your customers. Don’t assume you are at their feet – they will have a difficult time finding and replacing you.

If you find yourself having difficulty with cash flow or managing inventory, Spotcap are here to help. Spotcap offer unsecured business loans for up to 36 months for NZ SMEs to meet short-term financial obligations, allowing you to focus on what really matters – your business.