Protecting cash flow: what should your business payment terms cover?
Clear payment terms help a New Zealand business explain when payment is due, what a deposit covers and how changes or overdue accounts will be handled. Agree the terms before the work starts, keep evidence of acceptance and check fairness and consumer-law requirements. Strong wording alone does not guarantee payment.
Why should you review payment terms before cash flow becomes tight?
Payment terms work best when they form part of the agreement from the start. They help both sides plan, reduce uncertainty about invoices and provide a record if a disagreement develops. Reviewing them only after a customer defaults may leave the underlying problem unresolved.
This guide focuses on the payment process. It complements our existing article on whether terms of trade provide the protection you expect. The right terms should reflect how your business actually quotes, accepts orders and delivers work.
What should the payment process make clear?
It should identify the customer, the price and the events that trigger payment. A customer should be able to understand the obligation without assembling several inconsistent documents.
- Price: say whether GST, delivery and other charges are included.
- Timing: specify deposits, milestones, invoice dates and payment deadlines.
- Changes: explain how extra work or changed quantities are authorised.
- Disputes: provide a clear contact and process for raising invoice concerns.
- Overdue accounts: address any interest, collection costs or suspension rights that are legally appropriate.
For example, a service business might quote a fixed project fee but later undertake additional work on verbal instructions. A short written variation recording the price and timing can make the next invoice easier to understand and assess.
Can you add interest or recovery fees to a late invoice?
Only with an appropriate contractual or other legal basis. Adding a new charge to the invoice after work has been agreed does not itself establish an entitlement. The wording, acceptance, circumstances and applicable law all matter.
Have proposed charges reviewed for enforceability and fairness. Ask the same questions about deposits described as non-refundable, broad cancellation charges and automatic suspension provisions. A clause should address a legitimate business risk without promising rights the law does not allow.
Do unfair-contract-term rules apply between businesses?
They can. The Commerce Commission says the rules cover qualifying standard-form small trade contracts in trading relationships with an actual or expected total value up to $250,000 in a 12-month period. Consumer standard-form contracts also have unfair-term protections; additional grocery-supply rules exist.
Review clauses that let one side change prices, cancel freely, impose disproportionate consequences or restrict remedies. Whether a term is unfair depends on the legal test and the contract as a whole. Calling an agreement “business to business” does not settle that assessment.
Can terms exclude consumer guarantees?
Businesses cannot simply remove consumer guarantees when selling to consumers. Certain business transactions may qualify for contracting out, but the statutory conditions include written agreement, parties acting in trade and a fair-and-reasonable assessment. The Fair Trading Act has its own limits on contracting out.
Use terms suited to the customer and transaction. A single template copied from another business may mix consumer and commercial provisions in ways that create confusion. Our terms-of-trade and trading-protection services can help review the proposed approach.
How do you put revised terms into daily use?
Map the steps from enquiry to payment. Check when customers receive the terms, how acceptance is recorded and whether quotes, online checkout, purchase orders and invoices are consistent. Obtain advice before applying changed terms to existing agreements.
- Collect the documents and online screens customers currently see.
- Identify recurring payment disputes and avoidable delays.
- Review the clauses and acceptance process together.
- Train the people quoting and approving variations.
- Keep dated versions and acceptance records.
Canterbury Legal provides commercial-contract advice for businesses in Christchurch and beyond. Talk to our team before changing the terms used for your next order.
What other questions do people ask?
Can I change the payment terms on an existing customer’s invoice?
Do not assume a new invoice overrides the existing agreement. Review the agreed terms and any valid variation process before applying changes.
Does “no refunds” wording remove consumer rights?
No. A business cannot remove applicable statutory consumer rights simply by using a no-refunds statement.
Will strong terms stop every bad debt?
No. Terms support a clear agreement, but credit decisions, records, delivery performance and the customer’s ability to pay still matter.
Which official sources explain these rules?
- Commerce Commission: unfair small trade contract terms
- Commerce Commission: unfair consumer contract terms
- Consumer Protection: Consumer Guarantees Act obligations
- Commerce Commission: limits on contracting out of the Fair Trading Act
Information checked on 28 October 2026. This article provides general information about New Zealand law and is not a substitute for advice about your circumstances.
