The gap that costs you cash
Between doing the work and being paid there is a gap. During it you pay wages, suppliers and rent from your own cash. The longer the gap, the more cash the business needs, and the faster you grow, the bigger the amount you are lending your clients.
Three things set the gap
- When you invoice. The delay between finishing work and raising the invoice is pure cost.
- The terms you agree. 7, 14, 30 or 60 days from invoice date or from month end.
- How clients actually pay. Some pay on the due date, some a fortnight late, every time.
Of the three, the first is entirely in your control.
Ways to shorten it
- Invoice on the day you deliver, and in stages on longer projects.
- Take a deposit before work starts on new clients or large jobs.
- Offer a simple way to pay, such as bank details on the invoice and a payment link.
- Set shorter terms for new clients and review the terms of clients who regularly pay late.
- Where you can, agree longer terms with your own suppliers, so the two gaps overlap.
- Follow up on a fixed routine. See how to chase late payments.
Forecast by habit, not terms
A client on 30-day terms who pays in 45 days is a 45-day client as far as your bank balance is concerned. Forecast on the days they actually take, which you can read from your past invoices. Cadence shows which clients pay late and by how much, so you can plan for it. The debtor days calculator shows how much cash slow payment is costing you.