Getting paid - the sole trader cash flow problem
An hour a week. Gone.
A report published this month by GoCardless and Xero surveyed 800 small-to-medium business owners across Australia and New Zealand and found that over a quarter of small businesses spend up to an hour every single week just chasing late payments.
Think about that. An hour a week is around 50 hours a year – more than a full working week – spent not doing the work you love, not finding new clients, not developing your skills. Just following up on money you’ve already earned and are owed.
For sole traders, this hits differently. When you’re a team of one, an hour spent chasing an invoice is an hour taken directly from your working week. There’s no accounts receivable department to hand it off to. It falls on you to save your cash flow.
Reference:
- Xero Blog – How to break the cycle of late payments (October 2025)
The numbers behind the problem
Late payments aren’t just an inconvenience – they’re a significant financial drag on New Zealand’s small business economy. Xero’s Small Business Insights data consistently shows NZ businesses waiting an average of around 24-25 days to be paid after issuing an invoice, with clients paying an average of 6 days late.
In 2023, Xero calculated that late payments were costing Kiwi small businesses $827 million annually – an 81% increase from just two years earlier.
For a sole trader, a late invoice isn’t just a number on a spreadsheet. It’s your mortgage payment. It’s your ACC levy. It’s the tax you need to put aside. When cash flow stalls, everything stalls.
Reference:
- Xero – Late payments cost Kiwi small business more than $800 million (October 2024)
Why it happens - and why it's not always your fault
Late payments often feel personal. But most of the time they’re not. Larger organisations frequently use smaller businesses as a source of short-term working capital – holding off on paying invoices to support their own cash flow. The impact falls entirely on the people at the end of the chain.
It’s worth remembering though that this is also one of the reasons going out on your own can be so rewarding. As a sole trader, you set your own rates. When those rates reflect the true value of your expertise, the income you earn, even with the occasional late payment, can far outweigh what a regular fortnightly salary would bring. The irregular nature of the income is real, but so is the upside. Getting the basics of invoicing and cash flow right means you get to enjoy both.
Proactive steps to help make those payments happen
- Agree on payment terms before work begins – 7 days, 14 days, whatever suits you. Ensure invoicing T&Cs are included in your contract and all your invoices have clear due dates on them. Never assume a client knows when payment is due.
- Invoice the same day. The sooner you invoice, the sooner the clock starts. Don’t let invoicing slip to the end of the week. Get it out while the work is fresh.
- Make it easy to pay. Include your bank account details on every invoice. As a freemeup client, you’ll be using Hnry – our trusted partner and one of New Zealand’s leading accounting services for sole traders. Hnry’s invoicing feature is designed specifically to help sole traders get paid faster, with multiple payment options built in and automatic invoice chasing on your behalf. It takes the awkwardness out of following up entirely.
- Follow up before the due date. A friendly reminder a day or two before an invoice is due is perfectly reasonable. It shows you’re on top of your admin – and it often works.
- Include a late payment clause. You don’t need to enforce it aggressively. But having it in your agreement gives you a professional basis for a firmer conversation if needed.
A big part of financial freedom is having your heart and mind free from worry about the what-ifs of life.
Protect your cash flow - and enjoy your freedom
That’s something I think about a lot with freemeup. The services we offer – IT, health and safety, and insurance – are all about removing the kind of background stress that comes from having things unsorted. Cash flow is another version of that same problem. That’s exactly why we partner with Hnry – because sole traders who use freemeup already have access to one of the best invoicing and payment tools available, designed from the ground up for people working for themselves. When the basics are in order, you can focus on what you’re actually here to do.
Reference:
If you’re just setting up as a sole trader and want to make sure you’ve got your foundations right from day one, get in touch with us. We’d love to help.
Missed last month’s blog on what the Holidays Act changes mean for sole traders? Read it here.
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