Cash flow is the lifeblood of any business. Even a profitable operation can quickly find itself under pressure if customers or clients don’t pay on time. One of the simplest and most effective ways to protect your bottom line is to embed strong payment protections directly into your contracts. Here are five critical terms every business should consider.
1. Clear Payment Terms and Timeframes
Make it crystal clear when invoices are due and how payment should be made. Specify the timeframes (for example, “within 14 days of invoice”) and the accepted payment methods. This leaves no room for argument later.
2. Interest or Late Payment Fees
Include a clause allowing you to charge interest or late fees on overdue amounts. This not only compensates you for the delay but also creates a financial incentive for your customers to pay on time. Make sure your rates comply with any relevant laws in your jurisdiction.
3. Upfront Deposits or Progress Payments
Requesting a deposit or progress payments for larger jobs reduces your exposure. By ensuring you’re paid as work progresses, you’re not left carrying all the risk until the end of a project or engagement.
4. Right to Suspend or Cease Work
Build in a clear right to pause services or withhold delivery if invoices aren’t paid. This puts you in a much stronger position to secure payment without having to resort to legal action.
5. Personal Guarantees or Security Interests
For higher-risk customers, consider requiring a personal guarantee from a director, or registering a security interest (such as under the PPSR) over goods or services supplied. This gives you more options to recover the debt if the customer’s business can’t pay.
Protecting Your Business from Unpaid Accounts
Having strong terms in your contracts can drastically reduce the chance of late or non-payment. They also put you in a much better position to enforce your rights quickly and cost-effectively if a dispute arises.
At Twomey Dispute Lawyers, we help businesses draft robust contracts and enforce their payment rights. If you’re concerned about getting paid or want to review your existing terms, get in touch with our team today for tailored advice.
