Should Australian Businesses Still Offer 30-Day Terms?

By Sonja Pfitz

Australian businesses can still offer 30-day payment terms, but those terms should be treated as a credit decision rather than an automatic condition of sale. A customer who started at $10,000 a month may now be buying $50,000, so ask whether you would still extend the same unsecured credit today.

What Are 30-Day Payment Terms Really Giving Your Customer?

When you allow a customer to buy now and pay later, you are financing part of their business. There may be no loan agreement and no interest charge, but the commercial effect is the similar. You have supplied the product or service, you may already have paid wages, freight and suppliers, and the cash has not arrived. If you report GST on an accruals basis, the GST on that sale may also fall due before the customer pays. On a $100,000 invoice, your business is carrying a $100,000 unsecured exposure until the payment lands, which is why it pays to understand how your trade debtors are performing.

Trade credit is essential in many industries and helps build long-term commercial relationships, so the goal is to manage it rather than withdraw it. Many owners spend considerable time thinking about whether a bank will extend them credit, yet the credit they extend to customers each month often gets far less review.

Why Should Australian Businesses Review Customer Credit Now?

Payment pressure has built through 2026. CreditorWatch's Business Sentiment Survey of more than 1,000 Australian decision-makers found that four in five businesses had experienced late or overdue payments in the past 12 months, with delays averaging 25 days beyond agreed terms. CreditorWatch's April data then showed invoices more than 60 days overdue at their highest level since January 2020. Its sector figures put construction at 7.15 per cent and transport at 7.09 per cent of invoices more than 60 days overdue. CreditorWatch's chief executive has said businesses extending credit should watch customers more closely and act earlier, rather than waiting for arrears or defaults to appear.

A customer who was reliable five years ago is not necessarily in the same position today. They may have lost a contract, taken on debt, seen margins fall, changed ownership or built-up tax obligations, and you will often learn none of it until their payment behaviour starts to shift. That makes your accounting software one of the most useful early warning tools you already own, because what customers do tells you more than what their agreed terms say. A customer on 30-day terms who consistently pays at 45 days is really a 45-day customer, and one who has drifted from 30 to 45 to 60 to 75 days may be signalling pressure well before they say so.

How Can You Tell When a Customer's Payment Behaviour Is Changing?

The early signs tend to be small. Invoices that were once paid without question start being queried near the due date, payment promises are pushed back, full payments turn into part payments, and requests for higher limits arrive at the same time as slower payments. None of these proves a customer is in trouble on its own, but a pattern across several of them deserves attention. A customer who has always paid eventually is not the same as one who pays on time, and once your exposure has grown, waiting to see what happens can be expensive.

The next step is to work out your real exposure, which can be much larger than the overdue balance in your ledger. Goods delivered but not yet invoiced, work in progress, stock bought specifically for that customer and orders already committed all add to it, so a customer who appears to owe $80,000 may represent a considerably larger risk once the pipeline is included. That figure then needs to be weighed against the size of your own business, since a $100,000 loss means something very different to a $2 million business than it does to a $50 million one.

Should Every Customer Receive the Same Payment Terms?

Probably not. Standard terms are convenient, but customers carry different levels of risk. Long-standing customers with a strong history may be comfortable on 30 days, while newer or higher-risk accounts may suit deposits, progress payments, shorter terms or a lower credit limit. The right arrangement depends on the size of the order, the industry, the customer's history and how much your own business can comfortably carry. The aim is to keep trading easy for good customers while making sure the credit you give is a conscious commercial decision rather than something that continues because it always has.

When Should You Reduce a Customer's Credit Limit?

Reducing a limit is one of the harder decisions in credit management, because owners worry that changing terms will damage the relationship or send a valuable customer elsewhere. Sometimes that concern is justified, but it helps to ask how valuable the relationship really is if keeping it means constantly increasing the amount you have at risk. A large customer is not automatically a good customer, and one that needs longer terms, regularly exceeds its limit or delays payment may be hiding the pressure it creates behind impressive sales figures. This matters most where a single customer represents a significant share of your revenue, a theme I discussed in my article, Your Business Is Profitable. Why Is There Never Enough Cash?

Credit should not be a set-and-forget decision. It is worth revisiting when a limit is increased, when payment behaviour changes, when order volumes rise quickly or when you learn of a material change in the customer's business, with an annual review for larger accounts. Your sales team often hears first that a customer has lost a contract, changed management or started delaying purchases, so that information needs a clear path to whoever makes the credit decisions.

A simple test brings the review together. Would you willingly lend this customer the amount they currently owe you, unsecured, based on what you know today? If the answer is yes, the arrangement may still make perfect sense. If it makes you uncomfortable, it may be time to review the limit, the terms or the exposure you are prepared to carry.

I have spent more than 30 years in finance, business, operations and risk management. If you would like a second opinion on your customer exposure, payment terms or the cashflow effect of both, contact Pfitz Financial or book a free confidential appointment.