Payment timelines of 15 to 30 days are generally considered the standard in many industries. However, the increasing demand for flexible payment terms is pushing merchants into extending these periods. 

According to CAPS Research, 38% of manufacturing and service sectors use the 45-day payment terms, 1% implement 75-day, and 11% use 90-day invoice settlement periods. Longer receivable cycles are now part of a broader strategy to remain competitive and accommodate client payment cycles. Data prove this as two-thirds of B2B sellers experienced increased sales by making their payment terms more flexible.   

Despite these benefits, longer payment cycles also increase the risk of non-payment. On the concept of ageing accounts receivable, the likelihood of collection typically declines the longer an invoice remains outstanding. This presents the dilemma of balancing the benefits and risks of extended payment terms. Businesses must therefore assess whether longer settlement periods can support growth without exposing them to excessive receivables risk.

Managing Extended Payment Terms

Trade credit has always been a good way to boost sales as it gives customers better flexibility and more buying power. In recent years, there has been a notable increase in payment terms adjustments. 

Longer repayment terms can give a business a competitive advantage. Some customers consider this a factor in choosing vendors to trade with. Others may even avoid suppliers with an inflexible or short credit period. In hindsight, those who do benefit from maintaining steady sales volume and long-term customer partnerships.  

However, these credit arrangements also result in a longer time before payments are received, measured as Days Sales Outstanding (DSO). Notably, DSO is rising among Australian companies, increasing from an average of 33.2 days in 2023 to 35.4 days in 2024. If delays are added to this equation, the company must wait even longer to free up the cash it needs for operations. This can strain day-to-day activities, forcing businesses to rely on short-term financing or defer critical expenses. 

To manage the risks that come with longer settlement periods, companies need to implement proper risk mitigation strategies. Here are some of them:

Stricter Credit Risk Screening

Primarily, credit risk assessment should be stricter. Recent data from Equifax shows that high-risk credit enquiries jumped from 39% to 49% within a single quarter in 2025. Credit analysts interpret this behaviour as lenders becoming more cautious in response to economic pressures.

BNPL Solutions

Some businesses also use the strategy of partnering with buy now, pay later (BNPL) companies to offer flexible credit terms without assuming high risks. With BNPL, the merchants do not shoulder the risk of waiting for payment. The BNPL provider pays the supplier in full upfront, for a fee, then collects the payment from the buyer according to the agreed extended terms. 

However, while consumer BNPL is well established in Australia, B2B solutions are still emerging. Thus, vendors still need to rely on financial data tools and credit management partners to manage longer payment cycles with confidence and recover consumer unpaid debts if needed. 

Credit Management Support

Companies need to establish a robust credit management strategy, such as regularly monitoring ageing accounts, when implementing extended payment terms. This safeguards cash flow and reduces the likelihood of overdue or uncollectable invoices.

However, should late payments materialise, companies also need a contingency plan to recover outstanding payments efficiently. Partnering with a debt collection agency in Melbourne can provide expert support to recover overdue invoices and negotiate settlements, while protecting operations and customer relationships. 

Agencies, like Bluechip Collections, even provide easy arrangements for small businesses by operating on a “no collection = no commission” basis. It means that the vendor only pays the collector if the outstanding debt is successfully recovered. This approach mitigates default risk that may arise from the extended payment terms.

Bluechip Collections—Your Trusted Credit Specialists in Australia

Extending payment terms can boost sales and customer relationships, but businesses must also manage the associated risks. Strengthen your receivables control strategy by partnering with Bluechip Collections, Australia’s award-winning debt recovery and credit specialists. Our team supports businesses with customised receivables oversight and pre-debt recovery, delivering expert and transparent credit and legal guidance.

Call us on 1300 462 114 or fill out our contact form to book a free consultation.