Debtors and receiving payments

Common payment traps to avoid

Things won’t always go your way in business – but you can avoid many mistakes by knowing what to look for. This guide outlines common payment problems and proactive steps you can take to minimise your risk.

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What to look out for

Whether your business is new or well-established, it’s easy to get caught up in the day-to-day and fail to realise you’ve wandered into a situation that leaves your business exposed.

Large orders could leave you vulnerable

It might feel great to get a large order. But if you have to commit significant resources to fulfilling it and payment is delayed (or end up not getting paid at all), it can be too good to be true. 

If you get a large order:

  • Make sure you've checked your customer’s creditworthiness and received guarantees
  • If possible, ask for a deposit or arrange for progress payments.

These steps will improve your cash flow and reduce your exposure.

Danger of the single customer

Having a large proportion of your business come from one customer can have benefits. For example, if it allows you to get volume discounts, or build up a long-term relationship that gives you a steady and stable source of cash.

But if that customer exits the market or goes under, your largest source of cash flow could disappear overnight – sending you into the red.

Being targeted as a new business

If you’re a new business, be aware that you could be a target for people who have exhausted their credit (and credibility) elsewhere. 

How to reduce your risk

The good news is there are proactive steps you can take to reduce your vulnerability and prevent yourself from falling into these payment traps.

Diversify your customer base

If your business is dependent on one customer (or just a few customers), make customer diversification a top priority. It’s better to spread your risk over 10 smaller customers or clients than be dependent on one large customer for your business.

Review your customers

Make sure you’ve checked your customer’s creditworthiness and received guarantees, especially if they’ve placed a large order. If possible, ask for a deposit or arrange for progress payments. These steps will both improve your cash flow and reduce your exposure.

Follow up unpaid invoices promptly

For late payers, it’s important to get on top of the problem early. Not only will it help you avoid the issue escalating into something much more serious, but the earlier you start your credit control, the more relaxed you can make your initial contact. 

Once you’ve got an efficient invoicing system, review all your credit accounts regularly and contact those who have not paid within the agreed period. A phone call is best, so you can talk to a real person.

Review your payment terms and stick to them

There’s no hard and fast rule that you must request ‘payment by the 20th of the month following invoice date’. In fact, this could mean you only become aware of a problem up to 50 days after your first sales of goods and services. In the meantime, your customer might have bought even more from you, adding to the debt problem.

Aim to shorten your payment window for new customers. The advantage of requiring payment within a shorter time period – such as seven days – is you can send out three reminders within the first month. If people have accepted your credit terms, then you have a right to expect payment on time and you’re entitled to contact them if this doesn’t happen.

Be firm but fair. Most people are honest and will pay on time.

Keep up to date

Stay in touch with what’s happening in the business community so you’re one step ahead. 

Joining networks, your local industry group, chamber of commerce, or the Employers and Manufacturers Association can help you keep your finger on the pulse. Ask an ANZ Business Specialist for details.

Make it easy for customers to pay

Customers expect convenience, so offering a variety of payment options can provide a better customer experience and help ensure you get paid promptly.

Fortunately, there are plenty available to choose from as technology gets more and more sophisticated. Our easy payment options include ANZ FastPay and ANZ eGate™.

ANZ FastPay

ANZ FastPay is a mobile payment solution that lets you accept EFTPOS, Visa and Mastercard payments on the go anywhere, anytime.

It also accepts contactless payments. That means you can get paid on the spot, saving you time and improving your cash flow.

ANZ eGate™

ANZ eGate™ is an easy, convenient and secure way to accept Visa and Mastercard payments securely via your online store, over the phone, or by mail order.  With ANZ eGate™ your customers can buy from you anywhere, anytime. 

Managing risk in business

Risk is a part of business but with a good risk management plan you can determine not only what risks your business is exposed to but also what you want to do about it. This video will help you get started on identifying the potential risks to your business and your next steps.

Contact an ANZ Business Specialist

Our specialists understand your kind of business and the challenges you face as a business owner. We can help you figure out how to make your business grow and succeed.

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Important information

We’ve provided this material as a complimentary service. It is prepared based on information and sources ANZ believes to be reliable. ANZ cannot warrant its accuracy, completeness or suitability for your intended use. The content is information only, is subject to change, and isn’t a substitute for commercial judgement or professional advice, which you should seek before relying on it. To the extent the law allows, ANZ doesn’t accept any responsibility or liability for any direct or indirect loss or damage arising from any act or omissions by any person relying on this material.

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