Protect your business from rising costs. Switch to zero-cost EFTPOS.

Protect your business from rising costs. Switch to zero-cost EFTPOS. Learn more

The True Cost of Late Payments (and How to Reduce it)


12.07.2021 Payments

The True Cost of Late Payments (and How to Reduce it)

Chasing up late invoices is likely costing your business a lot more than you think.

Even with agreed-upon payment terms in place, Australian business invoices are consistently paid an average of 10 days late. But that’s Australian businesses in general; the truth is small and medium businesses are hit hardest of all.  

Not only do these overdue payments render your cash flow unpredictable, but they can add financial pressure and inhibit your ability to invest, expand and scale-up. Until a customer’s payment clears in your bank account, you’re unable to put those funds to work. 

This delay can even have a butterfly effect on the broader economy. Small-to-medium businesses generate approximately a third of private-sector GDP and employ almost half of all workers, so when your business is paid more slowly than average, you tend to then pay your own suppliers more than a week later than a business that’s paid on time. This domino effect can create a costly lag within the wider industry.

For these reasons, ensuring your customers are paying on time is a big part of maintaining a healthy business, and can in turn facilitate positive long-term relationships with your customers. Keep reading to discover our top tips for avoiding late payments.

The true cost of late payments

According to Xero, the average small Australian business is forced to wait 25.5 days for payment. Recent data shows that in the months between February and May, that delay bloats to 26.5 days. This difference of one day may sound small in the scheme of things, but actually equates to small businesses supplying a $600 million line of credit to their customers.

It has reached a point where the Australian Small Business Ombudsman, Kate Carnell, is now calling for a mandatory, regulated maximum payment time that forces larger businesses to pay up within 30 days.

Until this timeliness is mandated, however, this is what late payments are costing you.

Opportunity cost

One resource that’s largely forgotten when it comes to late invoices is the time spent chasing them up. 

The labour and effort spent on contacting customers instead of securing new business, making more sales, launching new products and marketing your business is the opportunity cost of late payments. As if that loss wasn’t bad enough, opportunity cost has a compounding effect because you’re paying employees for the extra time to follow up outstanding invoices — in addition to the cost of missing opportunities.

Time spent chasing up late payments is time that could be invested in your business.

Wasted time

When late payments are a consistent element of your business, it means you’re constantly losing hours of valuable time and energy. Instead of investing that time in critical business activities that will improve your overall commercial trajectory, it’s being wasted on unnecessary admin that could be avoided.

Impacted cash flow

The most concerning consequence of late payment is that it can drastically impact your cash flow. An erratic and unreliable inflow of cash can affect your ability to pay your bills and suppliers, and can even push you into a costly debt trap when you’re forced to take out a loan to cover your costs. The total cost of these late repayments by big businesses equates to a whopping $115 billion each year being withheld from small-to-medium business cash flow.

Tips to prevent late payments

Prompt payments empower you to better manage your business priorities, directing resources towards important needs and opportunities. Just as you ensure you pay your bills on time, in an ideal world your customers would pay you the same courtesy. However, that’s simply not the reality. Fortunately, late payments are a curse you can lift. Here’s how to do it.

Bring your terminal to your customer

Another barrier to payment is logistics. If you can’t accept contactless, on-the-spot payments, you’re automatically having to redirect time and energy into creating, issuing and following up invoices in the future. 

Cut out any potential confusion or payment delays by giving customers the option to pay upfront via a mobile EFTPOS terminal — something that is more often than not their preference, particularly with the perks, points and rewards that accompany credit card payments.  Many terminals require a direct power supply, however there are however a few, like this one, that allow you to accept payments on the move.

Suffice to say, the easier it is for your customers to make payment, the sooner you’re likely to get paid. So, if you're armed with intuitive accounting software and a mobile EFTPOS machine that accepts multiple payment methods, you’re one big step closer to minimising the cost of late repayments.


The quickest way to reduce late payments is to make it easier for your customers to pay on the spot.

Implement clear payment terms

Communicating your payment terms clearly from the get-go, and ensuring these terms are mutually agreed upon, puts you in great stead for prompt payments from day one. A lot of the time customers may not even be aware of your payment policy, so if it’s acknowledged early, a level of expectation is set. If late payments are detrimental to your business, it may also be worth introducing payment penalties. However, it’s important to assess whether this could potentially impact your customer relationships.

Automate your invoicing

One way to cut down on wasted hours is to invest in efficient accounting software. There are dozens of options to choose from when it comes to intuitive solutions, the trick is finding the one that suits your unique budget and requirements. 

Ideally, you’re after a program that streamlines the payments process and sends automated invoices and payment reminders that negate the need for you to invest fruitless hours in chasing them up yourself. These automated prompts can do wonders for stabilising your cash flow and freeing up resources for other important business operations and opportunities.

Make it easier for customers to pay you

Unnecessary hurdles to payment can delay funds reaching your bank account. One of the biggest of those hurdles is accepting limited payment options. 

Many business owners have a difficult time understanding the hidden fees and charges in the monthly statement from their merchant services provider. Some specify preferred accepted cards, while others go as far as refusing to accept certain payment types, because their provider charges a transaction fee based on the type of card used. Although relying on one or two methods of payment will help ensure your merchant statement is more straightforward, you may find that your sales and payment periods suffer as a result. 

As payment methods continue to evolve alongside new technologies, one of the best things you can do for your cash flow is accept multiple payment options. Offering your customers multiple options will instil in them a sense of control in the payment process, making it as effortless to pay invoices as possible. Not only does it make payment easier for every customer, you’ll no longer be reliant on one or two payment methods. 

One way to open your business up to accepting more payment methods is through a card reader. Zeller Terminal, for example, accepts Visa, Mastercard, American Express, eftpos, Apple and Google Pay, JCB, and will soon also accept Alipay and Zip Pay. We believe in keeping transaction fees to a minimum, so you’ll only pay 1.4% per transaction for any card that is tapped, dipped or swiped.

Now that you know the true cost of chasing up outstanding invoices, you’re well-positioned to learn how to invest those freed-up resources into scaling up your business. Sign up to our Business Blog to cash in on valuable insights sent straight to your inbox.


Accelerate your cashflow

Learn how Zeller can help accelerate your cash flow with fast, secure, on-the-spot payment solutions.