One of the main challenges that small businesses face with regard to cash flow is dealing with late payments from clients. A recent study carried out by Xero found that the average time small businesses must wait for clients to pay them is currently 31 days.

Last month (January 2023) on average small businesses were made to wait 8.4 days later to be paid than the agreed payment terms, according to accounting software Xero.

If your clients are large corporates or public sector organisations, then often they have set payment terms and it is hard to change this. However, it is worth asking the question when you first start providing a service or selling products to them. If they can’t change the payment terms, then ensure that you send them invoices as early in the process as possible to reduce the wait time.

If you deal with smaller businesses, then here are some tips that can help you to encourage clients to pay invoices more quicker.

1. Make sure you have a clear contract, and you inform your new client of the payment terms when you first start working with them.
2. If you provide service you may be able to ask for payment or at least a deposit before you start working for a new client.
3. Often businesses state that their payment terms are 30 days. Their clients may then wait till the end of the month to pay their invoices. If possible, reduce payment terms to 7 days or 14 days to speed up the process.
4. Make sure you send invoices out promptly; this should be a priority task and not left until you have time. If you send out monthly invoices these can be automated if you use accounting software.
5. Make sure you are sending the invoice to the right person. If it is sent to the Finance team, then you could copy in the business owner/manager that is buying the product or service from you.
6. If you are in an industry where late payments are the norm you could consider offering a discount or incentive for early payment.

So, what happens if some clients often pay their invoices late, here are some steps you could consider taking.

• Keep an eye on when the payment is due and if this does not arrive then send a polite email immediately asking when the payment will be made. You should attach the invoice again, so they don’t have to look for this.
• If the payment becomes very overdue then call the client and ask them if they have received the invoice and when they will be able to make the payment.
• If the payment still isn’t made it’s worth checking if it will help the client to pay in instalments if they are struggling with cash flow.

It is important to always stay professional and polite as your business reputation is very important. If you find it hard to chase invoices yourself then you could outsource to a bookkeeper who can send out and chase invoices as well as call on your behalf.

We hope this article is useful, if you would like any further advice please do contact us by calling 01623 490 120 or by emailing This email address is being protected from spambots. You need JavaScript enabled to view it.