How to get paid on time

​Earlier this year, Australia brought in their Payment Times Reporting Scheme which aims to improve payment times for small businesses. It requires large businesses and government enterprises to report their payment terms and times to increase transparency about their performance.

If you’re in business, you know that having cash in the bank is crucial to financial survival – you can be making a profit but, without the cash, you can go insolvent – and getting paid on time is important to keep the flow of cash moving through your business.

Many larger organisations have their own payment terms. Payment on the 20th of the month following the date of invoice is fairly standard in New Zealand. If you raise invoices, you can specify your own payment terms. But they may not be followed, and you may have to fit in with your client’s payment terms.

Knowing those payment terms is really important when you’re planning your cash flow. You cannot assume your client will pay when you think they will.

In my experience, the contact person that you are working with doesn’t always know their organisation’s payment terms. They will be happy to pass on your invoice, but it may get stuck in the larger payment process.

I’ve encountered lots of examples of payment policies creating cash issues for small businesses and I’ve learnt a lot about how to manage cashflow within those confines.

If you are dealing with larger organisations in NZ, here are a few things I suggest you bear in mind:

• Find out their payment terms up front – ask your contact to find out for you
• Find out what vendor set-up information they may require and abide by it
• Plan to raise your invoices to fit in with those payment terms (don’t be a day late and have to wait another month)
• Plan to receive your cash on their terms, not on your expectations
• If the payment is later than you expected, ask the Finance team if they have received your invoice. Often it hasn’t been passed on, or there is missing information that they need.
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For more information on planning your cashflows for client payment terms, contact Hilary on [email protected] and let’s see if we can improve your cashflow.