Getting paid on time is the foundation of any healthy business. But even the best credit risk management practices won’t eliminate every late payment.
What separates businesses that recover what they’re owed from those that write off bad debts is a clear, consistent overdue account process – one that starts the moment terms are agreed and follows a defined timeline right through to recovery.
This is Part 3 of our Effective Credit Management series. In Part 2 – credit documentation, we covered the agreements, credit applications, and terms of trade that protect you before a dollar changes hands. Here, we focus on what happens after an invoice goes unpaid, and how a structured collection timeline puts you in the strongest position to recover it.
Late payments aren’t an exception in Australian business – they’re unfortunately the norm. According to GoCardless’s 2025 Pursuing Payments report, 63% of Australian businesses are currently losing money to late payments, with 17% losing more than $2,500 per month. That figure was 11% just 12 months earlier – a 55% rise in a single year.
The drain isn’t just financial. One in five companies spends between six and 12 working days a year chasing overdue invoices. That’s time pulled away from running the business. A separate 2025 Atradius B2B Payment Practices report found that only 37% of Australian businesses had their invoices paid on time, and as many as 11% of outstanding invoices resulted in bad debts.
Effective credit risk management doesn’t stop at the credit application. It runs through your entire follow-up process. A defined collection timeline gives your team consistency, keeps communication professional, and signals to customers that your accounts are actively managed.
The result is fewer invoices going stale, better cash flow, and a smaller pool of debts that ever reach formal recovery.
The best overdue account processes start before the invoice is issued. These are the foundations worth having in place.
Payment terms should appear on every quote, order confirmation, and invoice. Net 30 days is standard across most industries; net 14 is common in professional services and some trade sectors. Whatever you choose, document it and obtain the customer’s written agreement before supplying goods or services.
For any account where you’re extending credit, a completed and signed credit application is non-negotiable. It confirms the trading entity’s legal name and ABN, authorises credit checks, and locks in the customer’s acceptance of your terms. This matters if the debt ever goes to litigation.
If you supply physical goods on credit, a well-drafted retention of title clause in your terms means ownership of those goods remains with you until you’re paid in full. Under the Personal Property Securities Act 2009 (Cth), that interest needs to be registered on the Personal Property Securities Register (PPSR) to maintain priority over other creditors – including in an insolvency event. An unregistered retention of title leaves you as an unsecured creditor if a customer goes into administration or liquidation.
Registering a retention of title on the PPSR is relatively simple and inexpensive. It needs to be done before you deliver the first order, not after a debt arises.
An invoice with the wrong entity name, a missing ABN, or an incorrect amount is a gift to slow payers. Audit your invoice template. And document your escalation process internally – who makes the first call, when it escalates, and who approves a payment plan. Consistent credit risk management requires clear internal rules, not ad hoc decisions.
The table below outlines a typical overdue account process for a business operating on 30-day payment terms. The aim at each stage is to resolve the account at the earliest possible point, while keeping communication professional and preserving the relationship where viable.
Day | Action | Purpose |
Day -2 | Courtesy pre-due reminder | Confirm receipt; flag upcoming due date; surface disputes early |
Day 0 | Invoice due – not yet paid | Internal flag only; account marked overdue in your system |
Day 3 | First follow-up phone call | Friendly check-in; confirm invoice received; ask for expected payment date |
Day 7 | Friendly payment reminder letter/email | Written follow-up; provides payment instructions; keeps tone positive |
Day 14 | Second follow-up call | Escalate slightly; seek a firm payment date commitment; note any dispute |
Day 21 | Final internal notice | Direct letter stating overdue amount and requesting payment by a set date |
Day 28 | Formal written demand | Final demand letter; states consequences of non-payment; firm deadline |
Day 35 | Review and escalate | If unpaid with no credible resolution, refer to commercial debt recovery |
Days 1–7 are about relationship preservation.
Most late payments in this window are genuine oversights. The invoice was buried in an inbox, the approvals process ran long, or the customer’s payment run fell just after your due date. A polite, professional prompt resolves the majority here.
Days 14–21 are for determining whether this is a payment delay or a payment problem.
If you’re receiving promises but no money, that’s a different situation. Start documenting every call, including the date, time, who you spoke to, and what they committed to.
Days 28–35 shift the tone.
A formal written demand makes clear the account won’t be left to drift. It also creates the paper trail that’s important if the matter progresses to litigation or enforcement.
Use this template at day 7, after your initial phone call hasn’t produced a payment date. Keep the tone neutral and helpful. The goal is to resolve the invoice, not create friction.
[Your Company Name] [Date]
Dear [Contact Name],
I’m following up on invoice [Invoice Number] for $[Amount], which was due on [Due Date].
If you’ve already processed this payment, please disregard this notice – and thank you. If not, we’d appreciate your attention to this account at your earliest convenience.
Payment can be made by [payment methods]. If you have any questions about this invoice or would like to discuss your account, please call me directly on [phone number].
Kind regards, [Your Name] [Your Title]
Use this at day 28 – after earlier contact has not produced a result. State the facts, the amount owed, and the consequences of non-payment clearly. Controlled in tone; firm in content.
[Your Company Name] [Date]
FINAL NOTICE – OVERDUE ACCOUNT
Dear [Contact Name],
Despite our previous correspondence, the amount of $[Amount] on invoice [Invoice Number], originally due [Due Date], remains unpaid.
We are requesting payment in full by [Date – 7 days from this letter]. If payment is not received by this date, we will refer this matter to our commercial debt recovery specialists and seek to recover all outstanding amounts, including any applicable recovery costs.
If there is a dispute regarding this invoice, please contact us immediately so we can work to resolve it before this matter escalates.
Regards, [Your Name] [Your Title]
If an account reaches day 35 with no payment and no credible resolution in sight, it’s time to refer it to a specialist in debt recovery.
Internal follow-up has a natural ceiling – your team has other priorities, and at some point, the cost of continuing to chase outweighs the return. A professional firm brings focus, capability, and legal options that most internal teams don’t have access to.
Recovery rates fall materially as debts age. An account that’s 60 or 90 days overdue is significantly harder to collect than one that’s 35 days overdue. Acting at the right point protects your recovery position.
When assessing a firm for commercial debt recovery, consider:
Commercial debt recovery doesn’t need to mean burning a customer relationship. A professional firm will work to preserve goodwill where that’s viable – and escalate to enforcement where it isn’t.
This three-part series has built a complete framework for managing credit risk from the point of approval through to recovery.
Part 1 covered the foundations: understanding credit risk management, establishing internal credit policies, and making sound decisions before you extend terms to any customer.
In Part 2 – credit documentation, we worked through the documentation layer: credit applications, terms of trade, personal guarantees, the retention of title clause, and why the paperwork you establish at the start directly determines your recovery options later.
Here in Part 3, we’ve outlined the overdue account process: the pre-invoice setup, the 35-day collection timeline, how to write effective reminder and demand letters, and when to bring in specialist help.
Together, these three parts describe a credit management system that reduces bad debt exposure, accelerates recovery when things go wrong, and keeps your business in the strongest possible legal position throughout.
For more information on anything you’ve read, reach out to the team at AMPAC for a confidential, no-obligation conversation.
The information in this article is general in nature and does not constitute legal advice. Seek independent legal advice for guidance specific to your business and circumstances.
A credit control process is the set of internal procedures a business follows to manage the credit it extends to customers and to recover money owed on time. It covers:
Sound credit risk management builds the credit control process into standard operating procedure – not just an ad hoc reaction when invoices go unpaid.
As a general rule, if an account is more than 30–35 days overdue and you haven’t received payment or a credible commitment to pay, it’s worth referring to a commercial debt recovery firm. The longer a debt sits unresolved, the lower the recovery probability. For larger balances especially, earlier escalation typically produces better outcomes.
Keep it brief, factual, and professional. Reference the invoice number, amount, and due date. Include your payment instructions and contact details in case of any queries. Avoid threats or aggressive language – at the reminder stage, the goal is to prompt payment while maintaining the relationship. The sample letter in this article provides a workable template.
A final demand letter should state the overdue amount, the original invoice due date, a summary of your previous contact attempts, a firm payment deadline (typically seven days from the date of the letter), and the consequence of non-payment – normally referral to a debt recovery specialist. The tone should be controlled and factual, not aggressive. It’s a business document, not a threat.
Mark Logue is a debt collection specialist and the joint managing director of AMPAC Debt Recovery. He has more than 30 years experience in the debt recovery and credit reporting sector, covering all segments of industry and commerce throughout Australia and overseas. Mark can be contacted by phone on 0409 749 709 or by email at m.logue@4ampac.com.au
Do you have debt that needs recovering? Are you unsure on where to start? Contact AMPAC Debt Recovery for solutions today and speak to one of our qualified consultants to get you started.
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