What are debtor days?
Debtor days — also called days sales outstanding — is the average number of days between issuing an invoice and receiving the money. It tells you how much of your own cash is tied up funding your customers, which makes it one of the most useful numbers a small business can track.
How do you calculate it?
Debtor days = (trade debtors ÷ credit sales for the period) × days in the period
Example scenario — illustrative only. A Geelong electrical contractor has $84,000 in unpaid invoices at the end of a quarter and invoiced $210,000 during that 91-day quarter.
(84,000 ÷ 210,000) × 91 = about 36 debtor days
If its terms are 14 days, customers are taking well over twice as long as agreed — and roughly $84,000 of the business’s cash is sitting in other people’s accounts.
How long are Australian businesses waiting?
Xero Small Business Insights data shows Australian small businesses waited an average of 22.9 days to be paid in the June 2026 quarter, with payments arriving 6.0 days after the due date on average. Those are cross-industry figures; construction and professional services often run longer.
At the large-business end, the Payment Times Reporting Scheme requires big businesses to report how quickly they pay small suppliers. The regulator’s August 2026 update put average common payment terms at 29 days for the July to December 2025 reporting cycle, while its headline measure — the time taken to pay 95% of small business invoices — was 64 days for January to June 2025. Knowing a large customer’s reported payment times before you quote can tell you a lot about the cash you’ll need to carry.
Seven ways to reduce debtor days
- Invoice the day the work is done. Every day an invoice sits in drafts adds a day.
- Show the due date as a date. “Due 30 April” is clearer than “30 days EOM”.
- Make paying easy. Bank details, a clear reference and a payment link on every invoice.
- Remind before the due date. A polite note three days early catches invoices stuck in approval.
- Call on day one overdue. For larger amounts, phone the person who approves payments.
- Take deposits and bill in stages on bigger jobs.
- Review who gets credit. Customers who always pay late cost you money every month.
How do payment claims work under Security of Payment laws?
Every state and territory has a Security of Payment Act for the building and construction industry. The details differ, but the idea is the same: a contractor or supplier has a statutory right to progress payments, can serve a payment claim, and the payer must either pay or respond with a payment schedule within a fixed time — “pay now, argue later”. Pay-when-paid clauses are void.
The payment claim
In broad terms, a payment claim must be in writing, identify the work or goods it relates to, state the amount claimed and request payment. Claims can generally be made monthly — on the date set in the contract or, if there isn’t one, the last day of the month. In NSW, some claims must also state that they’re made under the Act, and many contractors include that statement on every claim as a habit. Queensland’s QBCC guidance and NSW’s payment claim page set out the local requirements.
The payment schedule
If the payer disagrees with the amount, it must serve a payment schedule stating what it will pay and, if that’s less than claimed, why. If it serves no schedule in time and doesn’t pay, the full claim can generally be recovered as a debt or taken to adjudication.
The key deadlines by state
| State | Act | Payment schedule due | Longest payment term for a subcontractor |
|---|---|---|---|
| NSW | Building and Construction Industry Security of Payment Act 1999 | 10 business days after the claim (or earlier under the contract) | 20 business days after the claim |
| Qld | Building Industry Fairness (Security of Payment) Act 2017 | 15 business days (or earlier under the contract) | 25 business days after the claim |
| Vic | Building and Construction Industry Security of Payment Act 2002, as amended from 15 April 2026 | 10 business days | 20 business days after the claim |
| WA | Building and Construction Industry (Security of Payment) Act 2021 | 15 business days | 25 business days after the claim |
Head contractors claiming from a principal generally face shorter maximum terms — for example, 15 business days in NSW and for commercial head contracts in Queensland, and 20 business days in WA. SA, Tasmania, the ACT and the NT have their own Acts with their own timeframes.
Victoria’s 2026 changes are significant for subcontractors: claims can now be made from the last day of every month, previously excluded amounts such as some variations and delay costs can be claimed, and 22 December to 10 January no longer counts as business days.
A collections routine that works
Most late payments aren’t deliberate. They’re invoices lost in an inbox, waiting for a sign-off, or queued behind a supplier who chased harder.
| Day | Action |
|---|---|
| Invoice day | Send with the due date written as a date and a clear payment reference |
| Due date minus 3 | Friendly reminder with the invoice attached |
| Due date plus 1 | Phone the person who approves payments |
| Due date plus 7 | Second call and written reminder referring to your terms |
| Due date plus 14 | Escalate — pause further work or credit and seek advice |
Keep notes of every contact. If a dispute does arise, a clear record makes it much easier to resolve.
How do you build payment claims into your cash flow?
| Task | When |
|---|---|
| Serve the payment claim | On the contract’s claim date, or the last day of the month |
| Diarise the payment schedule deadline | The same day |
| Follow up on the schedule | A few days before it’s due |
| Enter the expected payment date | In your seasonal cash flow plan, using the due date, not the claim date |
| Act if a deadline is missed | The next business day, with advice |
Remember that many contracts also hold back retention from each progress payment. Our retention money guide explains how retentions are protected in each state and how to plan for them.
This guide is general information, not legal advice. Talk to a construction lawyer about your specific contracts.
How do you fund the gap while claims are paid?
Even with perfect paperwork, there’s a gap of weeks between paying your crew and suppliers and being paid on a claim. A revolving facility is built for exactly that — draw for wages and materials, repay when the claim is paid, and draw again next month. Our construction and trades page explains how we help builders and subcontractors, and our 60-second enquiry is free and doesn’t affect your credit score. To see how a facility refills as each claim is paid, read about our business line of credit.