How to reduce the risk of delayed or late payment

Thinking about how likely it is that your new client will pay you on time will help you work out how to approach payment terms or help you decide if you want to engage in a business relationship with them.

Understanding who your client is

There are some simple questions you can ask your new client that will help you understand who they are and the likelihood that they will pay you. Remember, every interaction you have with your client is a chance to enhance your business relationship.

Informal checks

In the context of an informal conversation, you may wish to ask questions that help you understand their business position. For example:

  • How long have they have been in business?
  • What other work do they do or what other products they supply?
  • What locations do they work in?
  • Do they have company directors, and if so, who are they?

These questions will help you understand how financially stable the business is. It is important to keep this conversation friendly and framed in the context of you getting to know them. You may wish to conduct an informal internet search to verify this information before choosing to proceed to more formal checks.

Formal checks

In some instances, you may wish to formally conduct a credit check of your new client. You might do this if the value of your product or service is beyond a certain threshold. The threshold is up to you to determine, but will likely be a value that you would have difficulty writing off if payment is not received. Ways to check payment history include:

  • Ask other businesses that engage with your new client about their payment behaviour. If you don’t already know of a business that engages with them, you may consider asking your new client for a reference.
  • Credit reporting companies provide cost effective credit reports on individuals and businesses. This may be particularly useful if the transaction value is large. Veda and Dun & Bradstreet are two of the most commonly used credit reporting agencies. Remember, a credit report will only tell you if there is a reported bad debt.
  • Protect yourself against potential illegal phoenix activity. This is where a business is deliberately liquidated to avoid paying creditors, taxes and employee entitlements. Go to:

Additional resources on how to prevent unpaid debt are available at

How to minimise exposure to late payment or non-payment

Sometimes, no matter how carefully you look into a client, you may experience late payment or non-payment. To minimise the risk and impacts of late or non-payment you may consider tailoring your payment terms. This may be easier to do when you control the payment terms. You may choose to:

  • Ask for upfront payments, cash on delivery or staged payments.
  • Tailor a deposit to the risk of the person or business you are dealing with. For higher risk individuals and businesses, you may seek a larger deposit.
  • Mitigate risk with a personal or bank guarantee. A guarantee is more applicable for high value transactions and contracts with longer time frames for performance and payment. For example, a property lease, or a longer term equipment lease.
  • Use the Personal Property Securities Register (PPSR) for goods you supply, so that you might get them back if they are not paid for. This is particularly relevant if you sell on retention of title terms, hire rent or lease goods, or deal in second-hand goods.