In this guide (12)
- Why do customers pay invoices late?
- How much cash is tied up in slow payers?
- What should you agree before the first order?
- How do you invoice so you get paid sooner?
- What is a good payment reminder schedule?
- Why send customer statements?
- When should you ask for a deposit or payment upfront?
- How can you make paying easier?
- Are early-payment discounts worth offering?
- When should you stop supplying a customer?
- How EasyTaskr helps
- Questions people ask
Key takeaways
- Most late payment is caused by unclear terms, slow invoices or no follow-up, not by customers who cannot pay.
- The payment clock only starts when the invoice reaches the customer, so send it the same day.
- Use one reminder schedule for every account and stick to it.
- Write down when supply stops, and tell customers before they need to know.
- Early-payment discounts are expensive; work out the yearly cost before offering one.
Why do customers pay invoices late?
Most late payment is not about money. It is about unclear terms, invoices that arrive late or wrong, no follow-up, and paying being harder than it needs to be. Fix those and most accounts speed up on their own.
Anyone who has run a trade counter will know the pattern. The customer who never pays on time is often the one whose invoices went out a week late, with no order number, to an email address nobody reads. The ones who really cannot pay are a small group, and a clear stop-supply rule deals with them.
So the work falls into three parts: before the sale, at the invoice, and after the due date.
How much cash is tied up in slow payers?
More than most owners think. Customer days, sometimes called debtor days, measure how long on average your customers take to pay.
Customer days = money owed by customers ÷ yearly credit sales × 365
Worked example: what 20 days is worth
A wholesaler sells 600,000 a year on credit. Customers owe 98,630 at any one time.
- Customer days: 98,630 ÷ 600,000 × 365 = 60 days
- If customers paid in 40 days, the balance would be 600,000 ÷ 365 × 40 = 65,753
- Cash released: 98,630 − 65,753 = about 32,900
That cash goes straight into the bank once, and stays there as long as the faster habit lasts. For many small businesses it is more than a year's profit, and it comes without selling anything extra. Our guide to cash flow shows how this fits with stock and supplier terms.
What should you agree before the first order?
Agree the payment terms in writing before you deliver anything on credit. Most disputes about late payment come from terms that were never stated clearly.
Set out:
- The terms. For example, "payment within 14 days of the invoice date" or "by the end of the month following the invoice". Use dates, not "prompt payment".
- The credit limit. The most the customer can owe at once. Start new accounts low and raise the limit as they pay on time.
- How to pay. Bank details, any card or payment-link option, and what reference to use.
- Who to contact at the customer for invoices and queries, with an email address and phone number.
- What happens if they pay late. The reminder steps and the point at which supply stops.
- Any order number the customer needs on invoices. A missing order number is a common reason invoices sit unpaid.
Get it signed, or at least acknowledged by email. Our guide on customer credit for wholesalers covers credit checks and limits in detail.
How do you invoice so you get paid sooner?
Send a correct invoice the same day you deliver. Payment terms count from the invoice date, so every day of delay is a day added to how long you wait for your money.
A good invoice:
- Goes out on the day of delivery or completion, not at the end of the week or month
- Goes to the named person or accounts address agreed at the start
- Shows the customer's order number and your invoice number clearly
- States the due date as a date, not just the terms
- Includes your bank details and payment reference
- Matches the delivery note exactly, so it is not held up in a query
- Shows VAT correctly, if you are registered, so the customer can reclaim it without asking for a new copy
Wrong invoices are slow invoices. A query about one line can hold up payment of the whole thing for weeks. Check quantities and prices before sending, especially when a customer has their own price list.
What is a good payment reminder schedule?
A fixed schedule, used for every account, so chasing is routine rather than personal. The table below works for most businesses on 14 or 30 day terms.
| When | What | Tone |
|---|---|---|
| 3 days before due | Short note: invoice number, amount and due date | Friendly |
| 1 day after due | Reminder email with a copy of the invoice | Polite, clear |
| 7 days overdue | Phone call to the named contact; agree a payment date | Direct |
| Month end | Statement of every open invoice on the account | Routine |
| 14 days overdue | Written notice that supply will stop at 21 days | Firm |
| 21 days overdue | Account on stop: no new credit orders until paid | Firm |
| 30 days overdue | Final letter before passing to collection or legal action | Formal |
Some notes on making it work:
- Call, do not just email. A short phone call to the right person settles more invoices than three emails. Ask "when will it be paid?" and write down the date and the name.
- Follow up on promises. If they said Friday and nothing has arrived by Monday, call on Monday.
- Same rules for everyone. If your best customer gets a pass, every customer learns that the rules are flexible.
- Keep notes. Who you spoke to, what they said, and what you agreed. It matters if the debt ever goes further.
- Separate disputes. If the customer disputes one line, sort out that line and ask for the undisputed amount to be paid now.
Why send customer statements?
A statement lists every open invoice, credit note and payment on the account, with the total owed and how overdue each part is. It turns several small reminders into one clear request.
Statements help in three ways. Many customers' accounts teams pay from statements, not invoices, once a month. They catch invoices that never arrived, before they become excuses. And they show credit notes and part payments clearly, which prevents arguments about the balance.
Send them at the same point every month, and make sure the ageing is visible: current, 1 to 30 days, 31 to 60 days and over 60 days.
When should you ask for a deposit or payment upfront?
Ask for a deposit when the order is large, custom-made or unusual for the customer, and ask for payment upfront from new or unproven customers.
Typical cases:
- Special orders you cannot sell to anyone else, such as tinted paint, cut-to-size materials or imported items
- Large first orders from new accounts
- Customers with a poor payment history, until they have paid on time for a few months
- Projects and services paid in stages, where a deposit covers your materials
A deposit of a meaningful share of the order, taken before you order stock in, protects your cash and tests the customer's commitment. Record it against the order so the final invoice shows the balance due.
How can you make paying easier?
Every extra step between "I should pay that" and "paid" adds days. Make the easy route the obvious one.
- Bank details on every invoice and statement, in the same place every time
- A clear payment reference, such as the invoice or account number
- A card or payment link, if your payment provider offers one, for customers who prefer it; check the fees against what faster payment is worth to you
- Payment on delivery for small or cash customers, with the driver able to take card
- Standing arrangements for regular customers who prefer to pay a set amount on a set date
Are early-payment discounts worth offering?
Usually not. They feel small but cost a lot when worked out as a yearly rate, and many customers take the discount and still pay late.
Worked example: the real cost of 2% for paying early
Your terms are 30 days. You offer 2% off if the customer pays within 10 days.
- The customer pays 98 instead of 100, twenty days earlier.
- The cost is 2 ÷ 98 = 2.04% for 20 days.
- There are about 18 periods of 20 days in a year: 365 ÷ 20 = 18.25.
- Yearly cost: 2.04% × 18.25 = about 37% a year.
Borrowing from a bank or an overdraft is very likely to be cheaper. Use an early-payment discount only if you are seriously short of cash and have no other source, and even then for a set period.
When should you stop supplying a customer?
At a point you have written down and told the customer in advance, such as 21 days overdue or going over their credit limit. Stopping supply is the strongest tool you have, and it works best when it is predictable.
A clear stop-supply rule:
- Is in the terms the customer agreed to at the start.
- Is triggered by facts: days overdue, or balance above the credit limit, not mood.
- Is checked at the point of sale. The till, the sales rep and the order desk all see the account status before a credit order goes through.
- Allows cash sales. The customer can still buy and pay on the spot; they just cannot add to the debt.
- Lifts automatically when the account is back within terms.
Worked example: two accounts
| Account | Credit limit | Balance | Oldest invoice | Action |
|---|---|---|---|---|
| Trade customer A | 5,000 | 3,200 | 9 days overdue | Phone call; agree a date |
| Trade customer B | 8,000 | 8,640 | 24 days overdue | On stop: cash only until cleared |
Customer B is both over the limit and past 21 days, so any new order must be paid for on the spot. Once the oldest invoices are paid and the balance is back under 8,000, the account reopens.
The cost of selling more to a customer who is not paying is not a lost sale; it is a larger debt you might never collect.
Questions people ask
When should I send a payment reminder?
A short friendly note a few days before the due date works well, then a reminder on the day after it falls due, and a phone call within a week. Later steps should be firmer and set out in advance.
What payment terms should a small business offer?
The shortest terms your market accepts. Many trade suppliers use 7, 14 or 30 days, or payment by a set day of the following month. New customers often start on shorter terms or payment upfront and earn longer terms by paying on time.
Should I charge interest on late invoices?
In many countries you can, if your terms say so or the law allows it. Check the rules where you trade before relying on it. In practice, a firm reminder schedule and stop-supply rule usually get paid faster than interest.
What is a customer statement?
A statement is a single document listing every unpaid invoice, credit and payment on a customer's account, with the total owed and how overdue each part is. It helps the customer's accounts team pay several invoices at once.
