Delayed payments: What they are and strategies to prevent them

- What are delayed payments?
- Impact on businesses
- Most common reasons why clients are paying late
- Legal and regulatory considerations
- Strategies for reducing late payments before they happen
- How to handle delayed payments when they do happen
- How to maintain cash flow despite payment delays
- Metrics to track
- Take control of payment delays with Ramp

Late payments from clients can disrupt more than just your cash flow—they can derail your business’s operations entirely. When invoices go unpaid, it creates a ripple effect, causing stress for your finance team and making it harder to meet obligations, pay vendors, or seize growth opportunities.
But late payments don’t have to become the norm. By understanding why they happen and how to manage them, you can protect your business and maintain healthy relationships with clients. In this article, we'll walk through what delayed payments are, why they can happen, their impact on your business, legal considerations, and strategies for managing them.
What are delayed payments?
Delayed payments happen when clients miss their agreed-upon invoice due dates. They could be a simple oversight or a symptom of a deeper issue, the result is always the same: Your business waits for money it’s owed.
Late payments put unnecessary stress on your entire business. Understanding the cause and how to manage payment delays is essential for your business because they can disrupt cash flow, damage operations, and strain client or vendor relationships.
Common scenarios for delayed payments include:
- Freelancers waiting for payment after completing a project
- B2B transactions where one business owes another
- Vendors who don’t receive payments from clients
Impact on businesses
Late and overdue payments can have a big impact on your business. If money doesn’t arrive when you expect it to, you’re left without the funds to cover your own expenses. The impact of a late payment goes beyond the inconvenience of waiting, leading to:
- Strained cash flow: Unpaid invoices can make it difficult to pay your own expenses, such as payroll or vendor bills
- Missed opportunities: Without timely revenue, your ability to invest in new projects or expand your business is compromised
- Damaged vendor relationships: If delayed payments put you behind on your own obligations, it could prompt tension between you and your vendors
- Wasted time and resources: Chasing down payments diverts energy from running and growing your business
- Reputational damage: If delayed payments affect your ability to pay your own bills, it could make clients or vendors not want to work with you
Delayed payments are like a domino effect. When you bill a vendor who doesn’t pay you on time, that lack of payment then cascades to your own business, and you can’t pay your bills when they’re due. As the dominoes fall, it can slow growth and threaten your business's stability.
Most common reasons why clients are paying late
Late payments can happen for any number of reasons. From a business perspective, some reasons are more acceptable than others. Distinguishing between valid and unacceptable reasons helps you address the problem appropriately and decide whether to continue working with the client.
Acceptable reasons for late payments
- Administrative errors: Sometimes, it’s a simple mistake. For example, a client might lose an invoice, misread payment terms, or enter incorrect details into their system.
- Unclear payment terms: Ambiguities in the payment agreement can cause delays. Examples include missing invoice due dates or unclear payment methods.
- Temporary or unexpected cash flow issues: Even reliable clients may face temporary cash flow problems, which can cause payment delays. The key here is communication and making a plan together.
- Bank processing delays: Even if the client paid on time, when there’s a hold-up with the bank, the money might be slow to get to you. This can happen because of bank holidays, manual approvals, or delayed transfer times.
Unacceptable reasons for late payments
- Willful neglect or avoidance: Some clients deprioritize payments to manage their own finances, leaving your business in the lurch. An example is when you’ve sent several notices, and the client still doesn’t pay until you threaten to send them to collections.
- Disorganization or poor internal processes: A lack of proper accounting or consistent oversight isn’t your problem; it’s your client's. Customers might say they’ve lost an invoice or tell you they’re still waiting on approval despite your contract terms.
- Habitual late payment without communication: It’s frustrating when clients are consistently late paying their bills, and it’s even worse when they don’t warn you that payments are coming late
Legal and regulatory considerations
When dealing with delayed payments, it’s important to understand your rights so you can protect your business operations, avoid violating any consumer or commercial protection regulations, and enforce the collection of your payments.
Check your local jurisdiction to confirm you’re keeping to the letter of the law, but in many states, you can collect late payment fees or penalties for delayed payments. Make sure terms are explicitly stated in your contract or terms with customers and clients so they’re enforceable.
You may consider legal action to collect on delayed payments when the bill is significantly overdue and all of your payment reminders have gone unanswered. Depending on the scope of the claim, you can consider using a collections agency, small claims court, or even civil lawsuits.
But laws can change quickly, and they vary from state to state. So it’s always best to consult with a legal expert to understand your rights and obligations, and the specific options available to you.
Strategies for reducing late payments before they happen
The best way to deal with late payments is to prevent them. But that’s not always possible since there are many factors outside your control.
By implementing clear processes, you can set expectations and make it easy for clients to pay you on time. Here are some proactive steps you can take to prevent delayed payments:
1. Set clear payment terms
Define payment deadlines, fees for late payments, and next steps in every agreement and invoice. Clear terms ensure clients understand their obligations, reducing the risk of confusion or disputes. Include these terms in your contract and make sure both parties agree to them before work begins.
2. Use invoicing software
Automated tools streamline the invoicing process. These solutions can send automatic reminders when due dates are approaching and track any overdue payments. Popular options include Ramp, QuickBooks, and FreshBooks.
3. Offer multiple payment options
Providing flexibility and multiple payment options makes it easier for clients to pay promptly. The more convenient the process, the less likely there'll be delays. Common options include ACH transfers, credit cards, checks, and online portals.
4. Build strong client relationships
Maintain open communication and deliver consistent value to strengthen your client relationships. When clients trust you, they’re more likely to treat your invoices as a priority. Addressing potential barriers to payment up front before they escalate can avoid many of the issues that lead to delays.
5. Send timely, professional reminders
Send reminders as due dates are approaching and after they’ve passed. The messages should be clear and concise, focused on receiving payment. Keep it professional, but follow up to ensure you receive your payment.
Use this as a sample reminder template if needed:
Subject: Reminder – Invoice #XXXX due on [date]
Dear [Client or customer],
I’m writing to remind you that Invoice #XXXX is due on [date]. Please submit payment via any of these options: [list payment options].
Let us know if you have any questions or concerns.
Regards,
[Your name, title, and business]
How to handle delayed payments when they do happen
Even with the best systems in place, late payments can still occur. When they do, having a plan helps you recover the funds while maintaining professionalism. These are the steps to follow when payment is overdue:
- Review contract terms and payment history: Before reaching out, confirm you’ve sent the invoice and that the client has received it. Check on the terms of your contract, including payment due dates, grace periods, and late fees, and double-check your payment history. If this is a recurring problem, it’s probably time to reach out more formally.
- Reach out promptly and professionally: Start with a polite but firm email or letter. Include the overdue amount, original due date, and any applicable late fees. Be clear about the next steps if the payment isn’t made. Persistence is key. Schedule follow-ups by phone or email if the first reminder goes unanswered.
- Offer payment plans if appropriate: For clients in financial distress, suggest splitting the invoice into manageable installments on a payment schedule to recover the full amount over time. You could also provide short-term extensions as a courtesy.
- Escalate communication if needed: If all else fails, consult with a legal expert about pursuing debt collection or small claims court
Proactively addressing delayed payments protects your business. Be firm so they take your communication seriously, but professional and respectful to preserve the client relationship.
How to maintain cash flow despite payment delays
Thoughtful planning and cost control can help your business stay resilient, even when payments are late. But even with strong payment processes in place, delays can happen. Here’s how to keep your cash flow steady:
- Build a cash reserve: Save 3–6 months of expenses to buffer against lean periods. Regular contributions keep your reserve reliable during delays, but it could take time to build or take funds away from growth opportunities.
- Diversify client base to reduce risk: Expanding your client base can potentially spread the risk of delayed payments. This protects you if one or two clients are delinquent in payments. However, it requires resources and time to expand that base.
- Use invoice factoring or short-term financing: Invoice factoring allows you to sell unpaid or open invoices for immediate cash. This maintains steady liquidity and helps you meet obligations while awaiting payments. Keep in mind that you may need to put up collateral, and there could be associated fees.
Metrics to track
If you aren’t tracking delayed payment metrics, you could be putting your business operations at risk. These are the key metrics to keep track of:
- Days sales outstanding (DSO): This is the average number of days it takes to collect payment after a sale. Monitoring which customers have high DSOs allows you to forecast potential delayed payments and compare client benchmarks.
- Number and value of overdue invoices: This is the total amount that is past due. This lets you know exactly how much is outstanding, identify trends, and pinpoint customers with a growing number of delayed invoices.
- Average collection period: This is the average number of days it takes to receive payments. It helps you understand if your accounts receivable policies work and lets you stay abreast of your liquidity status.
Take control of payment delays with Ramp
Payment delays don’t have to disrupt your cash flow. Ramp’s automated finance and accounting tools help you streamline billing and send timely reminders to keep payments on track. With integrated invoicing and multiple payment options, Ramp simplifies transactions for you and your clients, reducing the likelihood of delays.
By automating your process, Ramp helps you prevent delays and improve cash flow. Explore how Ramp can help simplify payments and keep your business moving forward with an interactive demo.

“When our teams need something, they usually need it right away. The more time we can save doing all those tedious tasks, the more time we can dedicate to supporting our student-athletes.”
Sarah Harris
Secretary, The University of Tennessee Athletics Foundation, Inc.

“Ramp had everything we were looking for, and even things we weren't looking for. The policy aspects, that's something I never even dreamed of that a purchasing card program could handle.”
Doug Volesky
Director of Finance, City of Mount Vernon

“Switching from Brex to Ramp wasn’t just a platform swap—it was a strategic upgrade that aligned with our mission to be agile, efficient, and financially savvy.”
Lily Liu
CEO, Piñata

“With Ramp, everything lives in one place. You can click into a vendor and see every transaction, invoice, and contract. That didn’t exist in Zip. It’s made approvals much faster because decision-makers aren’t chasing down information—they have it all at their fingertips.”
Ryan Williams
Manager, Contract and Vendor Management, Advisor360°

“The ability to create flexible parameters, such as allowing bookings up to 25% above market rate, has been really good for us. Plus, having all the information within the same platform is really valuable.”
Caroline Hill
Assistant Controller, Sana Benefits

“More vendors are allowing for discounts now, because they’re seeing the quick payment. That started with Ramp—getting everyone paid on time. We’ll get a 1-2% discount for paying early. That doesn’t sound like a lot, but when you’re dealing with hundreds of millions of dollars, it does add up.”
James Hardy
CFO, SAM Construction Group

“We’ve simplified our workflows while improving accuracy, and we are faster in closing with the help of automation. We could not have achieved this without the solutions Ramp brought to the table.”
Kaustubh Khandelwal
VP of Finance, Poshmark

“I was shocked at how easy it was to set up Ramp and get our end users to adopt it. Our prior procurement platform took six months to implement, and it was a lot of labor. Ramp was so easy it was almost scary.”
Michael Natsch
Procurement Manager, AIRCO
