When late payments become a warning sign

If your clients have noticed more customers paying late over the past year, they’re not imagining it. Four in five Australian businesses (80%) have experienced late or overdue payments in the past 12 months, and payment delays are averaging 25 days beyond agreed terms.

That’s more than just frustrating –  it’s a cash flow crisis in slow motion. And it’s creating opportunities for advisers who can spot the warning signs early and provide solutions before clients hit the wall.

The numbers tell a story

Let’s look at what’s actually happening out there.

There were 3,184 new personal insolvencies in the 3-month period to December 2025, up from 2,794 in December 2024, which is 14.0% higher than in the same period last year. Over a quarter (31.2%) were business-related – meaning sole traders, partners, or company directors.

Meanwhile, the Consumer Price Index (CPI) rose 3.8% in the 12 months to December 2025, with housing and food costs continuing to bite. Wages are up too – the latest figures show a 3.4% annual increase to the December quarter 2025 – but for many businesses, that’s adding to cost pressure rather than easing it.

And then there’s the global wildcard: the conflict in Iran. Oil prices have spiked, and that flows through to fuel, freight, and input costs – all of which land on your clients’ P&Ls.

None of this is catastrophic on its own. But together, it creates an environment where cash flow margins get thinner, and late payments stop being a minor admin headache and start threatening the ability to operate.

Why late payments matter more now

Here’s the thing: 17% of businesses now rate late payments as one of the top risks to their profitability. Nearly one in five.

Patrick Coghlan, CEO at CreditorWatch, put it plainly: “Even when they’re technically profitable, late payments are stretching cash flow to the point where owners are delaying decisions, dipping into personal savings and taking on risk they shouldn’t have to carry.”

That’s the reality for a lot of business owners right now. They’ve done the work. They’ve invoiced. They’re profitable on paper. But they can’t pay their own suppliers, or their staff super, or the ATO – because the money’s not in the bank.

And it’s not just about individual businesses. “When payment delays become normalised, the pressure doesn’t disappear, it’s pushed down the supply chain. That has real consequences for confidence, growth and the willingness of businesses to invest, hire or take on new work.”

If your clients’ customers are paying them late, chances are your clients are paying someone else late too. The pressure compounds.

What’s coming: Payday Super and ATO enforcement

If cash flow is already tight, there are two changes on the horizon that deserve attention.

Payday Super starts 1 July 2026

From 1 July, Payday Super means businesses will need to pay super at the same time as wages – not quarterly. For most businesses, that’s a timing change rather than a cost increase. But it does mean the cash flow cycle is strained even further.

If your clients are already dealing with late-paying customers, this adds another layer of timing pressure. They’ll need to plan for it now, not in June.

The ATO is back in collection mode

The ATO has also made it clear: tax debt enforcement is ramping up. During COVID, there was forbearance. That period is over. If businesses are behind on BAS or PAYG, they should expect firmer action – and faster.

The combination of tighter super timing and active ATO collection means there’s less room to use tax liabilities as a short-term cash buffer. That strategy, risky as it always was, is now off the table.

How to help your clients: five important conversations

So what can your clients actually do?

1. Help them tighten credit management and actually enforce it

This is where most businesses have room to improve. It’s not enough just to have terms – managing them actively is just as important, if not more so.

Recommendations for your clients:

Before extending credit: 

  • Run a credit check on new customers, especially for orders over $5,000.
  • For larger contracts, ask for a deposit or progress payments. 50% upfront is reasonable in the current environment.
  • Set credit limits based on the customer’s track record and risk appetite.

Once they’ve invoiced: 

  • Send invoices immediately – not at the end of the week or month.
  • Follow up within 7 days of an invoice becoming overdue. A polite phone call works better than an email.
  • Have a clear escalation process: reminder at 7 days, phone call at 14 days, formal notice at 30 days.
  • Don’t keep supplying customers who aren’t paying. It sounds obvious, but many businesses do this out of awkwardness or hope.

Consider payment terms: 

  • If offering 30-day terms but consistently getting paid in 60, tighten them to 14 or 21 days.
  • Offer a small discount (1-2%) for early payment. It costs less than the cash flow stress.
  • For high-risk customers or industries under pressure, move to COD or payment on delivery.

The key is consistency. If businesses don’t enforce their terms, customers will assume they’re negotiable.

2. Show them how to forecast cash flow properly

You can’t manage what you can’t see. Most business owners have a rough sense of their cash position, but that’s not enough when margins are tight.

What to recommend clients:

Build a 13-week rolling cash flow forecast: 

  • Start with opening bank balance
  • Add expected cash in (not invoices raised – actual payments expected to be received, based on customer payment history)
  • Subtract expected cash out (wages, super, rent, suppliers, ATO, loan repayments)
  • Update it weekly

This gives a rolling 90-day view of where pressure points will hit. Businesses will see the gap coming in week 8, instead of the day before payroll is due.

Coach clients to be realistic about timing: 

  • If customers typically pay in 45 days, don’t forecast payment in 30
  • Factor in seasonal patterns
  • Include one-off costs like annual insurance and BAS payments

And use it to make decisions: 

  • Can the business afford to take on that new contract, or will it stretch them too thin?
  • Do they need to arrange access to working capital?
  • Should they delay a capital purchase or negotiate extended terms with a key supplier?

Clients who forecast properly will come to you earlier with funding needs – when you have more options to help them and better terms to offer.

3. Help them build a buffer where possible and protect it

Cash reserves are a business’s shock absorber. Even a small buffer gives options when things don’t go to plan.

What to recommend: 

Target buffer size 

  • Minimum 4-6 weeks of operating expenses
  • If revenue is lumpy or seasonal: 8-12 weeks
  • Operating expenses = wages + rent + key supplier payments + loan repayments + ATO obligations

How to build it 

  • Set aside 2-3% of revenue each month
  • When they have a good month, bank some of it rather than spending it all
  • Allocate a portion of tax refunds or large payments to reserves

How to protect it 

  • Keep it in a separate account so there’s no temptation to dip into it for day-to-day expenses
  • Only use it for genuine emergencies – a major customer going under, an unexpected cost, a cash flow gap that can’t be bridged another way

If a client doesn’t have capacity to build reserves, that’s a signal they need to look at pricing, cost base, or access to working capital. That’s your cue to have a deeper conversation.

4. Position finance as a strategic tool, not a last resort

This is where advisers have the opportunity to add the most value – helping clients understand their funding options before they’re desperate.

Cash flow problem vs. profitability problem: 

Cash flow problem (finance can help) 

  • Profitable but waiting 60-90 days to get paid while costs are due now
  • This is a timing problem – finance bridges the gap

Profitability problem (finance won’t fix) 

  • Costs consistently exceed revenue
  • Need to look at pricing, margins, or cost structure first

Solutions:

Invoice finance: allows businesses access cash tied up in unpaid invoices. Instead of waiting 60 days to get paid, they can access up to 80-85% of the invoice value within 24-48 hours. It works well if:

  • The business is growing and needs working capital to take on new work
  • They have reliable customers who pay eventually, just not quickly
  • They’re in an industry with long payment cycles (manufacturing, B2B services)

Trade finance and supply chain finance: If the challenge is paying suppliers upfront (especially for imported goods), trade finance can help bridge the gap between when your clients need to pay and when they get paid by their customer.

The key is timing: Set up access to finance before clients are desperate. Once they’re in crisis mode – behind on ATO, bouncing payments, scrambling for payroll – options narrow and costs go up.

5. Encourage the hard conversations early

If your clients are under pressure, they’re not alone. Their suppliers, customers, and finance providers are navigating the same environment.

Coach clients to communicate proactively: 

With customers who are paying late 

  • Pick up the phone and find out what’s happening.
  • If they’re in genuine trouble, work out a payment plan.
  • If they’re just being slack, be firm.

With suppliers 

  • If they need extended terms, ask – many suppliers would rather give an extra 14 days than lose a customer.
  • Be upfront about timing rather than making promises they can’t keep.

With banks or finance providers: 

  • If they’re going to miss a repayment or need to adjust a facility, communicate early.
  • Providers have more options when given notice

The businesses that get through tough periods are the ones that communicate early and manage relationships actively. Silence makes things worse.

Be the broker who sees around corners

Late payments are an early warning system.

They signal that customers might be under pressure. They signal that the broader economy is tightening. They signal that businesses need to be more deliberate about cash flow management.

Your opportunity is to be the adviser who helps your clients navigate this. You can:

  • Help them spot the warning signs early
  • Give them practical frameworks to manage cash flow
  • Position the right funding solutions at the right time
  • Be the trusted adviser who keeps them out of crisis mode

Your clients can’t control when they get paid. But with your help, they can control how they respond.