For most New Zealand small businesses, the fastest way to find cash isn’t a loan — it’s the money customers already owe. Every day you knock off your average collection time releases cash that’s sitting in someone else’s bank account. This guide is a practical system for doing exactly that.
First, measure where you are
Debtor days = trade debtors ÷ credit sales × 365
If you’re owed $120,000 and credit sales are $1,100,000 a year, debtor days = 120,000 ÷ 1,100,000 × 365 ≈ 40 days.
Your accounting software’s aged receivables report shows how much is current, 30, 60 and 90+ days overdue. Look at it every week.
What each day is worth
Using the example above, one day of sales is roughly $3,000 ($1,100,000 ÷ 365). Cutting debtor days from 40 to 30 frees about $30,000 — permanently, not once. Plug your own numbers into the cash-flow gap calculator to see the effect on your funding gap.
Step 1: invoice immediately
The single biggest improvement for most trades and service businesses. If you finish a job on the 3rd and invoice on the 31st, you’ve added four weeks to your debtor days before the customer even sees the bill.
- Invoice from your phone on site, the day the job’s done.
- For ongoing work, bill weekly or at each milestone rather than monthly.
- Set up recurring invoices for retainers and regular services.
Step 2: set clear, short terms
Your terms should suit your cash cycle, not your customer’s preference.
| Customer type | Common terms |
|---|---|
| Residential / one-off customers | Payment on completion, or 7 days |
| Small trade customers | 7–14 days |
| Commercial accounts | 20th of the month following |
| Large corporates / government | Often set by them — negotiate before you sign |
Put terms on every quote, every invoice and in written terms of trade. If you charge late-payment interest or recovery costs, the customer needs to have agreed to that upfront.
Step 3: make paying easy
- Bank account number clearly on every invoice.
- Online payment links (card, account-to-account) where the fees make sense.
- Reference instructions so payments match invoices automatically.
- Direct debit for regular customers.
Friction delays payment. Remove it.
Step 4: deposits and progress billing
For large jobs, don’t fund the whole thing yourself:
- Deposits for materials on residential work — 20–30% upfront is common in many trades.
- Progress billing at defined stages for longer projects.
- Materials charged on delivery for supply-heavy jobs.
Step 5: a follow-up rhythm
Most late payment is disorganisation, not refusal. A consistent rhythm fixes most of it:
| When | Action |
|---|---|
| 3 days before due | Friendly reminder email |
| Due date | Automated reminder |
| 1 day overdue | Phone call — “just checking it’s in the system” |
| 7 days overdue | Firm email, confirm payment date |
| 14 days overdue | Phone call from the owner; pause further work if appropriate |
| 30+ days overdue | Formal letter of demand; consider next steps |
Automate the reminders in your accounting software; make the calls yourself.
Step 6: construction payment claims
If you’re in construction, the Construction Contracts Act 2002 matters. It sets rules for payment claims and payment schedules:
- A properly made payment claim has specific content requirements.
- The payer must respond with a payment schedule within the time the contract sets (or the default in the Act) if they intend to pay less than claimed.
- If they don’t respond properly and don’t pay, you may be able to recover the full claimed amount as a debt, and you have rights to suspend work and to adjudication.
- Retention money held under a construction contract must be held on trust.
Getting claims right is one of the most powerful cash-flow tools a contractor has. The Act itself is on legislation.govt.nz, and a construction lawyer can review your templates. See also trades & construction business loans.
Step 7: know when to escalate
For accounts that are genuinely stuck:
- Letter of demand — clear amount, deadline and next step.
- Disputes Tribunal for claims within its limit — relatively informal and inexpensive.
- Debt collection agency — useful when the relationship is over.
- Statutory demand for companies (legal advice recommended).
Stop the problem at the start
- Run a quick credit check or ask for trade references before extending credit to new commercial customers.
- Set credit limits.
- Watch for warning signs — part payments, changing excuses, new contacts in accounts.
When waiting is unavoidable
Some customers pay slowly no matter what — large corporates, councils, main contractors. If that’s built into your business, fund the gap sensibly rather than stretching suppliers or IRD. A business line of credit or working capital loan can cover the wait, with unsecured decisions sometimes made the same day for businesses trading six months or more. Start a 60-second enquiry — no credit score impact.