Section 1: Setting the Foundation

Payment terms that get respected

Good collections start before the invoice is issued. Terms agreed to clearly — in the quote, the contract, and the invoice — are far more likely to be honoured than terms that appear for the first time when payment is due.

• State terms clearly at quote stage: '14 days net' or '30 days net'

• Include payment terms in every contract with explicit client sign-off

• Restate terms on every invoice alongside clear payment instructions and multiple payment options

• Confirm payment details at project kickoff — before the invoice exists

Making your invoice easy to pay

Every invoice should include: a clear description of what is being billed; the invoice number and date; the due date written in full; the total amount; multiple payment options; and a direct contact for queries.

Section 2: The First 30 Days — Prevention

Send a reminder before the due date

A brief reminder sent 3–5 days before the due date confirms the invoice was received and surfaces any issues early.

Act within 24 hours of a missed payment

The most important rule in collections: act within 24 hours of a missed payment. Not this week when you get a chance. Within 24 hours.

Section 3: Days 31–60 — Systematic Follow-Up

If a client is struggling with cash flow, offer a payment plan at day 14 or 21. A client paying in instalments is better than one not paying at all.

Section 4: Days 61–90 — Escalation

By day 61, a formal letter of demand — clearly stating the amount, the original due date, the history of requests, and the consequence of non-payment — changes the dynamic. Many debts that resisted months of follow-up resolve at this stage.

Section 5: Beyond 90 Days — Formal Action

• Statutory demand (debts over $4,000 to a company) — triggers a 21-day response window

• Referral to a commercial debt recovery solicitor — legal letterhead significantly improves resolution rates

• Security of Payment adjudication (construction) — faster and lower-cost than litigation for progress payment disputes

• External collections specialist — when internal effort is exhausted

Section 6: The Metrics That Matter

Frequently Asked Questions

How many payment reminders should I send before escalating?

A typical professional reminder sequence includes 3–4 reminders over 30 days before moving to formal escalation. The first reminder should go out within 24 hours of the due date, with follow-ups at 7, 14, and 21 days overdue.

What is a good Days Sales Outstanding (DSO) for an Australian small business?

A DSO of 35 days or under is generally considered healthy for Australian SMEs. The national average is closer to 53 days. Tracking DSO monthly gives you an early warning of cash flow pressure before it becomes a crisis.

When should a small business use a debt collection agency in Australia?

External collections specialists are typically appropriate when internal follow-up is exhausted (usually 90+ days overdue) and the debt amount justifies the cost. For most debts under $10,000 resolved within 60 days, automated internal follow-up is more cost-effective than engaging an agency charging 15–30% commission.

About Chargetree

Chargetree is an automated accounts receivable and collections platform built for Australian businesses. We help tradies, contractors, agencies, and service businesses get paid faster — without damaging client relationships. Chargetree integrates with Xero to automate payment reminders, escalation workflows, and collections from just $69 a month. No commissions. No lock-in. Learn more at chargetree.co.

Here is your collections system — now let Chargetree run it.

Chargetree automates the entire playbook above — from first reminder through to escalation triggers — all synced with Xero. No manual process to manage.

Start your free trial or book a demo → chargetree.co