How to SetUp Payment Terms in Australia: The Guide for Business Owners
- Simon. P
- Sep 15
- 5 min read
Updated: Sep 18
Cash flow will make or break your business. And payment terms? That’s the lever that controls it. Most business owners don’t setup clear payment terms until it’s too late — when clients delay, cash dries up, and things spiral fast.
You can avoid the chaos by setting smart, strategic payment terms for small business upfront.
This guide shows you exactly how to set up payment terms in Australia and get paid faster — without guesswork.
What Are Payment Terms and Why They Matter
Payment terms define when and how your customers are expected to pay you. They create structure, reduce confusion, and protect your cash flow.
They typically cover:
Invoice due dates (e.g. Due on Receipt, Net 7, Net 14, Net 30)
Payment methods (bank transfer, card, direct debit, PayPal)
Late fees or interest
Early payment incentives
Deposits and milestone schedules
In Australia, payment terms should align with Australian Consumer Law and fair trading standards. Clear terms are also critical for debt recovery and enforceability.
Why Payment Terms Matter for Business Owners
Protect your cash flow: Faster payments = more capacity to reinvest and grow.
Avoid payment delays: Clear terms remove confusion and give you legal footing.
Look professional: Consistency across proposals, contracts, and invoices builds trust.
Scale with confidence: Set once; apply everywhere — proposals, website, accounting software.
💬 Real Talk: Payment terms aren’t admin — they’re a financial strategy. The difference between “surviving” and scaling starts here.
What You Need Before You Setup Payment Terms
A registered business name and ABN
A business bank account
Accounting software or invoicing system (Xero/MYOB/QuickBooks)
Awareness of your average cash cycle (quote → delivery → payment)
A contract/terms-of-trade template (powerful for enforceability)
Mentor Tip: Ask yourself, “If a client pays 3 weeks late, can I still operate?” Build terms that protect your runway.
How to Set Up Payment Terms in Australia:
Step-by-Step
Step 1: Define Your Ideal Payment Timeframe
Before you copy “Net 30” from a template, choose what supports your cash flow:
Due on Receipt for one-off services or low-ticket jobs
Net 7 or Net 14 for services with short delivery windows
Net 30 if your industry expects it — paired with deposits
Deposits (e.g. 50% upfront) or milestones for projects
Payment before delivery for physical goods or custom work
Outcome: Terms that support your cash flow — not just your client’s.
Step 2: Standardise Your Terms
Once decided, roll them out everywhere:
Contracts and engagement letters
Invoices (configure defaults in Xero/MYOB/QuickBooks)
T&Cs on your website and proposals
Email signatures or proposal footers (short reference)
Outcome: Your business speaks with one voice — no surprises, clean enforcement.
Step 3: Automate Invoicing and Reminders
Use your software to:
Auto-generate invoices with due dates and payment links
Send reminders before and after due dates
Track overdue invoices with a clear escalation process
Outcome: Systems chase payments so you don’t have to.
Step 4: Offer Incentives and Set Penalties
Encourage on-time payment and deter delay:
Early payment discount (e.g. 2% if paid within 7 days)
Late fees/interest (reasonable, clearly disclosed)
Clear debt recovery wording and suspension-of-service clause
Outcome: Motivation for clients to pay on time — and consequences if they don’t.
Step 5: Communicate Payment Terms Clearly
Don’t bury your terms. Put them where they matter:
On every invoice (front and centre)
In your contract and proposal documents
On your website (if you sell services/packages)
Outcome: Clients know exactly how and when to pay — no confusion, no excuses.
Payment Terms for Small Business (Australia)
Common, practical options:
Due on Receipt — best for small, quick jobs and new clients
Net 7 / Net 14 — popular for service-based businesses
Net 30 — acceptable in many industries (pair with deposits)
Milestones — structured payments for longer projects
Retainers — fixed recurring payments (set a strict due date each cycle)
Tip: Track DSO (Days Sales Outstanding) monthly. If it creeps up, shorten terms or tighten enforcement.
Invoice Payment Deadlines & Escalation Timeline (Australia)
Day 0 (Issue): Send invoice with clear terms + payment link
Day -3 (Reminder): Friendly reminder before due date (for Net terms)
Due Date: Automated reminder + quick-pay link
Day 7 Overdue: Firm reminder, add late fee note
Day 14 Overdue: Suspension notice (if applicable) + call
Day 30 Overdue: Final notice + notify of collections/legal
Keep reminders polite but firm; always include balance, due date, and how to pay.
Overdue Invoice Process (Australia): Step-by-Step
Polite Reminder (on due date): “Just a nudge — here’s the payment link.”
Firm Reminder (7 days overdue): State late fee/interest and new total.
Suspension Notice (14 days overdue): Pause work until payment clears.
Final Notice (30 days overdue): Advise escalation to collections/legal.
Handoff: Engage debt recovery or small claims if unpaid.
Document everything. Keep call notes and email threads. It matters if you escalate.
Automate Client Payments (Direct Debit, Card, E-Invoicing)
Direct Debit (e.g., GoCardless): Collect on due date; great for retainers
Card-on-file (Stripe/PayPal): One-click pay; set auto-charge with consent
E-Invoicing (Peppol): Government-backed standard; invoices flow system-to-system
Xero/MYOB Reminders: Enable pre/post-due reminders; add payment services
Dunning: Sequence reminders + incentives, then apply late fees
Mini-Setup Checklist
Add a payment service to invoices (card/direct debit)
Enable pre-due and post-due reminders
Offer early-payment discounts on long terms
Store a client’s preferred method (with consent)
Standardise your overdue workflow
Legal & Compliance Notes (Keep It Simple)
Unfair Contract Terms (UCT): Keep fees reasonable and clearly disclosed.
Surcharging: If you surcharge cards, disclose it upfront.
Chargebacks: Card payments can be disputed — keep delivery evidence.
Retention of Title (PPSR): If you sell goods on terms, consider registering security interests.
Security of Payment (Construction): Industry-specific rules may apply to progress claims.
This is general information only. For edge cases, get legal advice.
Cost of Implementing Payment Terms
Tool or Action | Cost Range |
Xero / MYOB / QuickBooks | $25 – $85/month |
Contract template (one-time) | $0 – $300 |
Legal review (optional) | $150 – $500 |
Reminder automation | Included in most accounting tools |
Money-Saving Tip: Use templates from trusted platforms and your accounting software’s built-in payment services.
Common Mistakes Business Owners Make
Copy-pasting terms from another business → your cash cycle is different
Not including terms on the invoice and in the contract → hard to enforce
Manual chasing → automation exists for a reason
Skipping late fees → no consequences, no urgency
Client-friendly, founder-hostile terms → your business isn’t a bank
What to Do Right Now
✅ Download: business resources from [prodesk.com]
✅ Need help? Book with Noize — done-for-you strategies [noize.com.au]
✅ Starting up? Get the StartUp Deck (which includes 6 months access to ProDesk) [thestartupdeck.com]
FAQs
Do I need to charge late payment fees?
Optional but recommended. Reasonable, clearly disclosed late fees create urgency and protect cash flow.
Can I set payment terms shorter than 30 days?
Yes. 7–14 days is common for service-based businesses in Australia.
How do I enforce payment terms legally?
Put them in contracts and invoices. Keep records. Use debt collection or small claims if breached.
What should I include in payment terms?
Due date, payment methods, deposit/milestones, early-payment discounts, late fees/interest, and dispute window.
Can I change payment terms per client?
Yes — document clearly in your contract and set per-client defaults in your invoicing system.
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