When customers pay late: funding the debtor gap

There is a special kind of frustration in watching a profitable month turn into a cash crisis because one customer hasn’t paid. The work is done, the invoice is sent, and the money should be there. But until it arrives, it can’t pay wages, suppliers or the tax bill.

How big is your debtor gap, really?

Before choosing a solution, put a number on the problem. Pull your aged receivables report and look at three figures:

1. Total outstanding — everything customers owe you.
2. Overdue amount — anything past your payment terms.
3. Concentration — how much of it sits with one or two customers.

A business with $80,000 spread across forty customers has a very different problem from one with $80,000 owed by a single main contractor. The first is a collection rhythm issue; the second is a concentration risk.

What funding works for late payments?

Tool	How it helps	Best when
Invoice finance	Advance against unpaid invoices	You invoice other businesses regularly
Single-invoice funding	Advance against one large invoice	One big customer is slow
Line of credit	Draw when debtors lag, repay when they pay	Delays are frequent but short
Unsecured short-term loan	Lump sum, repaid over weeks or months	A one-off gap with a clear payment date
Property-secured loan	Larger amount against property	Debtor delays combine with other pressures

For trades and construction businesses, where retentions and progress payments stretch timing, the construction and trades page covers specific issues.

How do lenders view your debtor book?

Lenders like debtors who are established businesses or government agencies with good payment histories. They are more cautious with a book dominated by one customer, by related parties or by consumers. They also look at your own bank statements to confirm the business can carry repayments if collections are slower than hoped.

If you would like a quick read on your situation, you can find out where you stand in about 60 seconds. There’s no credit check to enquire.

How can I get paid faster?

Funding fills the gap; good processes shrink it:

• Invoice the day the work is done, not at the end of the month.
• Make terms clear on quotes, contracts and every invoice.
• Offer easy payment — bank transfer details on the invoice, online payment links.
• Follow up early. A friendly reminder a few days before the due date works better than a stern one weeks after.
• Escalate firmly when needed. For smaller disputed amounts, the Disputes Tribunal can be an option. For an unpaid company debt, a formal demand may be appropriate after taking advice.

An illustrative example: the subcontractor and the main contractor

Take an illustrative electrical subcontractor working on a commercial fit-out in Hamilton. They invoice $60,000 at the end of the month on 20th-of-the-following-month terms, but the main contractor’s payment run slips another three weeks. Meanwhile, the subcontractor has wages every week, materials on account and a GST return due.

Here, single-invoice funding or a short-term loan sized against that one invoice would bridge the delay without locking the business into a long facility. If this happens on every job, a revolving line of credit or a full invoice finance facility becomes the more efficient answer, because the cost only runs while money is outstanding.

Questions lenders will ask about your customers

• Who are your main customers? Established businesses, councils and government agencies are viewed more favourably.
• What are your normal terms, and how often are they exceeded?
• Are any invoices disputed? Disputed amounts are usually excluded from invoice finance.
• Are any customers related to you? Related-party debts are typically not funded.
• How concentrated is the book? If one customer is more than half your receivables, expect closer questions.

Having your aged receivables report ready makes the conversation faster. Most accounting software produces one in a couple of clicks.

Late payments and your own obligations

When customers pay you late, it becomes tempting to pay your own bills late too. The problem is that your obligations — wages, PAYE, GST, rent — come with their own consequences. Inland Revenue in particular charges penalties and interest on late tax. Funding the gap usually costs less than letting several of your own commitments slip at once, and it protects relationships that matter just as much as the one with your slow customer.

Stop waiting on other people’s payment runs

If customers owe you money and your own bills won’t wait, let’s look at the fastest way to bridge it. You won’t be credit checked for enquiring, your information goes to one person — not a queue of lenders — and that person calls you to talk it through properly.

Tell us how much is owed, by roughly how many customers and how far overdue, so we can match you to the right tool first time. Talk to us about your debtor gap.