What to do when customers don't pay

The problem is bigger than you think

In Portugal, payment terms of 60 days or more are common, and many companies wait 90, 120 days or more to get paid. Meanwhile, fixed costs don't wait.

1. Prevent before you collect

The best collection is the one you never have to make. Before you take on a new customer:

• Check the history: is the tax number active? Any insolvency proceedings?
• Start with short terms: 30 days for new customers, extend as you build trust
• Invoice immediately: the sooner you send the invoice, the sooner you get paid
• Set penalties in the contract: late-payment interest is provided for by law (DL 62/2013)

2. Charge late-payment interest

Portuguese law (Decree-Law 62/2013) allows you to charge late-payment interest on commercial transactions. The rate is the ECB rate + 8 percentage points: from 1 July to 31 December 2026, that means 10.40% a year, in Portugal and in Spain.

Many SMEs don't charge late-payment interest for fear of losing the customer. But the law exists to protect SMEs precisely.

Work out the late-payment interest you are owed →

3. Set up automatic reminders

A simple reminder system helps cut delays:

• 7 days before the due date: "A reminder that invoice FT2026/0042 is due on the 15th"
• On the due date: "Invoice FT2026/0042 is due today"
• 7 days after: "Invoice FT2026/0042 is 7 days overdue"
• 30 days after: formal notice referring to late-payment interest

4. Diversify your customer base

If one customer accounts for more than 25% of your revenue and starts paying late, the impact on your treasury is disproportionate. Diversification is the best protection against non-payment.

Assess your customer concentration risk →

5. Use factoring to transfer the risk

Instead of waiting months for payment, advance the value of the invoices. With a non-recourse offer, the bank or funder takes on the risk of non-payment: if the customer doesn't pay, the loss is theirs, not yours. The funder's offer says whether it is with or without recourse, before you accept.

How factoring works →