What to do when customers don't pay

The problem is bigger than you think

In Portugal, 43% of SMEs report cash-flow difficulties caused by late customer payments. The average collection period is 67 days — but many companies wait 90, 120 or more days. 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. In 2026, that means roughly 12% a year.

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 cuts delays by 30-40%:

• 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 non-recourse factoring, the bank takes on the risk of non-payment — if the customer doesn't pay, the problem is the bank's, not yours.

How factoring works →