skip to log on skip to main content
VoiceOver users please use the tab key when navigating expanded menus

Article | 4-minute read

Deciding on payment terms that suit your business

Cash flow improvement

For businesses looking into the future it is important to be prepared for uncertainty with a resilient cash flow plan and manageable debt. These seven steps can help you strengthen your cash flow, plan effectively for the future, and eliminate debt problems before they occur.

1. Do you need to offer credit at all?

Depending on the type of business you run, you may be able to reduce the number of credit accounts you offer and if possible, avoid extending credit during uncertain times, or at all. Getting payment at the point of sale improves your cash flow and eliminates the possibility of having to chase people for payment. Accepting credit cards can be a straightforward way to offer your customers credit. 

Extending credit to customers can reduce your cash cycle - a key component of a successful business.


2. Be careful who you extend credit

If you're going to extend credit, your customers should complete a credit application. Ask a supplier if you can use their form as a guide or get a free sample from a local debt collection agency. Include your terms of trade and ask your lawyer and accountant to suggest improvements. Check credit referees to make sure the customer has paid promptly in the past. If the customer refuses any of your terms, it’s your business decision whether to take the risk of supplying on credit. If in any doubt, ask a credit agency for a credit check on a prospective customer.


3. Improve your invoicing

Customers won’t pay until they’ve been invoiced, so the sooner you invoice, the sooner you can get paid. A common mistake is to see the sale as everything and forget about invoicing until much later. There’s no reason to wait – invoice as soon as you've made the sale.


4. Revise your terms

There’s no need to stick to the tradition of ‘payment by the 20th of the month following invoice date.' Changing your payment terms to 'payment within x days' may help improve cash flow. Asking for ‘payment by the 20th of the month following invoice date’ also means it could be up to 50 days before you know there’s a problem. In the meantime, the customer may have bought more from you, adding to their debt.

Payment terms are linked to your cash cycle so be sure you've got them right for your business.


5. Reconsider statements

Repeated end of month statements simply summarise what the customer owes. This extra administrative step costs time and money, so why not eliminate it by stating at the bottom of your invoices in bold: ‘Please pay on this invoice as no statement will be sent.' Some customers – typically larger ones who receive multiple invoices from you – may try to insist on end of month statements, but most will happily pay against an invoice.


6. Don’t be afraid to cut off credit

Adopt a consistent policy of refusing to supply customers who are seriously overdue and who haven’t responded to your follow-up. Insist that the outstanding debt be settled first before you choose to supply more goods.

Putting a black and white policy in place will be best for your business in the long term.


7. Minimise your risk by avoiding these traps

Be prepared for large orders: If you commit significant resources to fulfilling a large order and payment is delayed, your business may be at substantial risk. Ensure you’ve carried out credit checks and received guarantees. If possible, ask for a deposit or arrange for progress payments. This will improve cash flow and reduce your exposure.

Danger of the single customer: If your business is dependent on very few customers, make customer diversification a top priority. It’s much better to spread your risk over ten smaller ones than being reliant on just one large customer.


Next steps

Download our cash flow improvements checklist (PDF) for 34 ways to improve your cash flow.


Related articles

Do you need finance?

Is lack of cash limiting your business' growth, or are there other options forward?

Keep reading



Reviewing your pricing strategy

There may be no such thing as the perfect price, but could there be room for improvement?

Keep reading



Managing your business’ overheads 

In the current environment, you may have had to take short-term reactive measures to cut your business’s expenses and monitor any overheads closely.

Keep reading



Get in touch

Request a call back

Have us call you back to discuss your business needs

Leave your details


Talk to someone local

Chat with one of our local business bankers

Find your local business banker


Any advice does not take into account your personal needs, financial circumstances or objectives and you should consider whether it is appropriate for you.

ANZ recommends you read the applicable Terms and Conditions and the ANZ Financial Services Guide (PDF 104kB) before acquiring the product.

This page contains only general information which is subject to change and is not a substitute for commercial judgement or professional advice. This information does not take into account your personal and financial needs, particular objectives and/or circumstances, and you should seek appropriate independent advice (which may include property, legal, financial, taxation and accounting advice) before making any decisions, investing, or acting on it.

Tools, templates, checklists, and calculators (“ANZ Tools”) linked or referred to on this page, are only some of many ways to analyse a business or industry, or to assist your planning and business decision making. You should seek the assistance of your accountant, business or other advisor when either planning for or analysing your business.

To the extent permitted by law, all members of the ANZ group of companies, their employees, officers and contractors (“ANZ“), offer no warranty and disclaim liability or responsibility to any person for any actions, claims, costs, demands, liability, or direct or indirect losses or damage that may result from using or relying on the information set out in the pages or the ANZ Tools, and / or any act, omission or error, by any person in relation to them.  To the extent permitted by law, ANZ makes no warranty and has no liability in respect of your use and reliance. ANZ Tools are also subject in many cases to further specific cautionary wording and disclaimers which you should read.

ANZ tools, templates and checklists are only some of many ways to analyse a business or industry to assist your planning and business decision making. You should seek the assistance of your business advisor or accountant when either planning for or analysing your business' performance. To the extent permitted by law, ANZ makes no warranty and has no liability, in respect of your use of and reliance on these tools.