Payday is Friday. Your customers have promised to pay next week. What now?
Updated: 1 day ago
A customer’s promise to pay next week cannot fund Friday’s wages, so confirm the payroll gap today and work through collections, available cash and realistic alternatives immediately.
Payday is Friday. It is Wednesday afternoon, the payroll file is nearly ready and the account balance is lower than expected. A good customer says the invoice is in the next payment run. Another has not returned your call. Neither answer tells you when the money will clear.
For an Australian business owner, the immediate task is to establish what can actually be paid on time. The next task is to stop this Friday becoming every Friday.
The short answer
Check the full payroll requirement and the payment processing deadline.
Chase specific invoices with the people who can release payment.
Review available reserves and spending you can genuinely change.
Treat finance as a possible option only after checking timing, cost and repayment.
Payday is Friday: start with the amount that must clear
Ask your payroll person or bookkeeper for the approved payroll amount, payment date and processing arrangements. Check overtime, allowances and other amounts due. A rough estimate based on last week can miss a larger roster or an adjustment.
Your wage obligations follow the applicable employment requirements. Customer payment delays do not change them. The Fair Work Ombudsman’s guidance on paying wages explains the obligation to pay employees for work performed. Check the relevant award, agreement and employment arrangements rather than assuming you can move payday.
Next, establish usable cash. Reconcile the account and identify scheduled debits, payments already submitted and restrictions on any funds. A balance displayed on a screen is a starting point, rather than a complete payment plan.
Include tax and superannuation obligations in the wider schedule. Do not silently borrow their allocated cash without understanding the consequences. The distinction between profit and cash available to pay bills helps explain why a profitable week can still leave payroll exposed.
Turn “next week” into a useful answer
An accounts receivable list is most useful when someone adds a name and a next action to it.
Start with the invoices most likely to produce cleared funds before the payroll deadline. Ask the customer’s accounts team whether the invoice is approved, whether anything is missing, what payment run it is in and when the transfer is expected. Confirm the amount as well as the date.
If the usual contact cannot release payment, politely ask who can. A purchasing manager may be happy with the work while accounts payable is still waiting for a purchase order number. Sending a corrected document today may help more than a fifth reminder to the same inbox.
Where practical, ask whether the customer can pay an undisputed portion now. Record what was agreed and keep following up. Do not rewrite your forecast as if a verbal commitment were already money received.
The government guidance on payment terms explains why clear contractual arrangements matter. For future work, make the due date, invoice requirements and collection process clear before you supply.
Find breathing room without moving the problem onto staff
Review planned expenditure line by line. A discretionary equipment purchase may be postponed. An owner distribution may be reconsidered. Unused subscriptions may be cancelled in line with their terms. None of these decisions should rely on withholding wages already owed.
Talk to suppliers about an agreed change where appropriate. Explain the amount and proposed date, then document any arrangement. Simply leaving a bill unpaid is not the same as negotiating more time, and extending terms can affect supply or pricing.
Check whether an owner contribution is realistic, properly documented and affordable for the owner. An exhausted personal reserve is not an endlessly renewable business resource. Your accountant can help distinguish a contribution from a loan and explain the records required.
These actions belong in a wider plan to improve cash flow before borrowing. Even a modest reduction in the gap can change the amount and cost of any funding required.
An illustrative Friday with three possible outcomes
Suppose a business needs $24,000 for payroll and has $16,000 of usable cash after other committed payments. The immediate gap is $8,000. These are illustrative figures, with other obligations already accounted for.
A customer owes $12,000 and initially promises to pay next Tuesday. If an authorised person arranges an $8,000 part payment that clears before payroll processing, the immediate gap closes. The business still needs to check next week’s position because that receipt has arrived earlier than originally forecast.
If the customer can only pay on Tuesday, the $8,000 gap remains. A promise has improved the information available, but it has not improved Friday’s balance.
If the customer disputes the invoice, the repayment plan needs another source. Borrowing against the assumption that the dispute will disappear by Tuesday would add uncertainty to an already tight position. Resolve the issue and revise the forecast rather than counting the whole invoice as available cash.
When could borrowing help?
Finance may help with a defined timing gap where the business can demonstrate how it will repay. It also creates another obligation, so assess it against the cash remaining after the expected customer receipt and the following payroll.
An existing facility may offer usable headroom, subject to its terms. A new application may require documents, assessment, approval and establishment before funds can be drawn. Do not schedule Friday’s wages against an unapproved application or an advertised turnaround time.
Different loans, overdrafts and lines of credit have different repayment patterns. Invoice finance may be relevant to eligible invoices, but a disputed or incomplete invoice may be unsuitable. Your broker should explain the options that fit the actual receivables and business position.
Ask for the total cash cost, repayment dates, security, guarantees, fees and consequences if the customer pays late again. The guide to working capital loan costs sets out the questions beyond the headline interest rate. Speed alone does not tell you whether the next month is affordable.
Build next Friday into this week’s decision
Once the immediate position is clear, extend the schedule. A 13-week cash flow forecast helps you see whether the shortage is a one-off collection delay or a recurring mismatch between weekly wages and monthly receipts.
The government’s cash flow guide also emphasises financial records and planning. For this situation, give particular attention to the days between completing work, submitting an invoice, customer approval and cleared payment.
If each payday depends on finding a new receipt or borrowing more, involve your accountant promptly. ASIC’s insolvency guidance for directors recommends early professional advice when financial difficulty is suspected. A series of optimistic collection dates is not a substitute for assessing whether debts can be paid when due.
Set one weekly review time with the person responsible for collections and the person running payroll. Compare expected receipts with actual arrivals. Then make changes while there is still room to act.
A checklist before the payroll deadline
Confirm the approved payroll total and when funds must be available.
Reconcile usable cash and committed payments.
Record the person, amount and clearing date behind each expected receipt.
Confirm any supplier agreement or owner contribution in writing.
Check whether proposed finance can be available in time and repaid afterwards.
Escalate an unresolved shortage to your accountant immediately.
Frequently asked questions
Can I tell staff their wages will arrive when the customer pays?
Customer payment timing does not remove wages already owed. Do not unilaterally defer payday. If you cannot meet payroll, obtain urgent employment and accounting advice about your obligations and the business’s position.
Should I offer a discount for immediate payment?
A discount may help if the customer can genuinely authorise and clear payment in time. Calculate the margin you give away, agree the amount in writing and check the revised invoice treatment with your bookkeeper. A discount achieves little if payment still misses payroll.
What should I take to a finance discussion?
Take the payroll schedule, current balances, debtor list, confirmed collection information, existing debts and a short cash forecast. Explain the amount and deadline honestly. A useful discussion tests the repayment source as carefully as the immediate funding need.
Need to Plan for the Next Payday?
Fairlane Finance can help you assess possible funding structures against your business’s cash-flow timing.
General information only. This article does not constitute financial, credit, legal, tax, accounting, compliance or valuation advice. Finance is subject to lender approval, eligibility criteria, terms, fees and conditions. Consider obtaining independent professional advice for your circumstances before acting.
