Customers paying late? Fast ways to fill the gap — and shrink it

How big is your late-payment problem, really?

Before choosing any funding, measure the gap. Pull an aged debtors report from your accounting software and look at three things:

1. How much is overdue, and by how long (under 30 days, 30–60, over 60).
2. Who it’s owed by — one big customer, or lots of smaller ones?
3. Whether it’s getting worse month on month.

One large customer three weeks late is a one-off problem. Dozens of customers routinely paying a fortnight late is a structural one. They need different fixes.

Which funding fits which pattern?

Pattern	Option that often fits	Why
One big customer, one-off delay	Short-term loan	Repaid when that customer pays
Many B2B customers, routinely slow	Invoice finance	Advances on every invoice; grows with sales
Recurring but modest gaps	Line of credit	Draw when needed, repay when paid
Slow payers plus a big growth spurt	Invoice finance	Scales automatically
Customers are consumers, not businesses	Line of credit or short loan	Invoice finance usually won’t apply

Products repaid by daily debits — including many merchant cash advances — are usually a poor fit here. When you’re already waiting on customers, a daily deduction from your account deepens the squeeze.

How does invoice finance help?

With invoice finance, a financier advances a large share of each eligible invoice’s value soon after you issue it, then pays you the balance (less fees) when your customer pays. Because it’s tied to your invoices, it depends heavily on your customers’ creditworthiness — which can be an advantage if you sell to large, reliable organisations that just pay slowly.

Expect the financier to register a security interest on the Personal Property Securities Register, and to check your debtors before approving. For the comparison with a revolving limit, see invoice finance vs line of credit.

Illustrative example. An Auckland commercial cleaning company invoices property managers monthly on 30-day terms, but many pay at 45 to 60 days. Wages go out weekly. As the company adds contracts, the gap widens. Invoice finance on its property-management invoices advances cash within days of invoicing, and the facility grows with every new contract — without the owner needing to reapply.

What can you do for free, starting today?

Funding fills the gap; habits shrink it. These cost nothing:

• Invoice the same day the work is done or the goods are delivered.
• Make terms and due dates obvious on every invoice.
• Make paying easy — bank details, payment links, reference numbers.
• Send a friendly reminder before the due date, not just after.
• Call on day one of being overdue. A phone call is far more effective than a third email.
• Agree a payment plan with customers who genuinely can’t pay in full, rather than letting it drift.
• Review terms for repeat late payers — shorter terms, deposits or payment upfront.
• Use your forecast. business.govt.nz recommends cash flow forecasting; include realistic payment dates, not the ones on your invoices.

What about GST on unpaid invoices?

If your business is registered for GST — required once turnover reaches $60,000 in a 12-month period — how you account for GST affects whether you pay GST on invoices before customers have paid you. Late payers can mean paying GST to Inland Revenue on money you haven’t received. Your accountant can tell you whether a different accounting basis is available and sensible for your business.

How do you choose between the options quickly?

Ask three questions:

1. Are my customers businesses or consumers? Consumers rule out invoice finance.
2. Is this one customer or many? One points to a short loan; many points to a revolving facility.
3. Is the gap growing with my sales? If yes, invoice finance usually scales better than a fixed limit.

If you answer “businesses, many, growing”, invoice finance is probably your best fit. If it’s “consumers, many, steady”, look at a line of credit. If it’s “one customer, one-off”, a short loan repaid on that customer’s payment is simplest.

When is it time to stop extending credit?

When a customer is consistently very late, keeps disputing invoices or owes an amount that would seriously hurt you if it were never paid, the risk has shifted from cash flow to bad debt. Funding can bridge cash flow; it can’t make an uncollectable debt collectable. Consider tightening terms, requiring deposits or, ultimately, pausing work until the account is brought up to date.

Waiting on customers and short this week? Tell us what’s owed and by whom.

How does this connect to payroll and working capital?

Late payers are the single biggest cause of payroll stress for small employers. If wages are the pressure point, read covering payroll. For the bigger picture — stock, wages and debtors together — see working capital loans. And if the gap keeps recurring, a business line of credit set up in a calm month is often the simplest long-term fix.

Get paid sooner, in effect

You’ve done the work; waiting for the money shouldn’t put your business under pressure. Applying with us involves no credit check upfront, and your details aren’t sent around to a list of financiers — one specialist looks at your debtors and calls you. Please be accurate about who your customers are, how much they owe and how long they usually take to pay; that’s what tells us whether invoice finance, a line of credit or a simple short loan is the right fit. See if you qualify.