What late payment really costs a small business, at today’s rates

Most owners treat a late payment as an irritation. It is a loan. You did the work, paid your staff and your suppliers, and now you are funding your client’s cash flow out of your own overdraft or your own savings. The only questions are what that loan costs, and who is paying for it.

The answer is usually: more than you think, and you are.

The rates right now

On 23 September 2026 the Reserve Bank raised the repo rate by 0.25 percentage points to 7.25%. From 25 September the banks’ prime lending rate went to 10.75%.

Most business overdrafts and facilities are priced at prime plus a margin your bank sets for you. Your statement or facility letter shows the rate you actually pay. If you fund the gap from savings instead, the cost is the interest those savings are not earning. Either way, the money is not free.

The sum

The cost of carrying a late invoice is:

invoice amount × your borrowing rate × days late ÷ 365

Take a R100,000 invoice, paid 60 days late, carried on an overdraft at prime plus 2, which is 12.75% today. (Your margin may be higher or lower; use your own.)

R100,000 × 12.75% × 60 ÷ 365 = R2,096

On its own that does not sound like much. Now put it next to the job. If that R100,000 job made a 15% margin, your profit was R15,000. The late payment took R2,096 of it: 14% of your profit, gone, for doing nothing except waiting.

Nobody would sign a quote that gave away 14% of the profit. Late payment does it without asking.

Across a year, it is a salary

One late invoice is a nuisance. A habit is a cost line.

Say your business turns over R10 million a year, your terms are 30 days, and on average your clients actually pay in 75. That 45-day gap means about R1.23 million of your money is permanently sitting in your clients’ bank accounts instead of yours.

Carried at 12.75%, that costs about R157,000 a year. At prime alone it is still about R133,000. That is a salary, paid every year, to fund other people’s businesses.

You are not imagining it

If it feels as though everyone pays later than they used to, the data agrees.

• In the Small Business Growth Index (Absa, SACCI and Unisa’s Bureau of Market Research, fieldwork April to May 2025), 60% of small businesses described their cash flow as weak or critical. Only 2.8% called it strong.
• Government is one of the worst offenders. Treasury Regulation 8.2.3 requires national and provincial departments to pay suppliers within 30 days. At the end of September 2025, those departments still had 95,399 invoices older than 30 days unpaid, worth R12.4 billion. In the same quarter they paid another 112,442 invoices late, worth R10.0 billion.

What the law says about interest

If your terms do not set an interest rate on overdue accounts, South African law sets one for you. Under the Prescribed Rate of Interest Act, the default rate is the repo rate plus 3.5 percentage points. It has been 10.50% since 1 July 2026. Because the repo rate rose in September, the Act’s timing rule takes it to 10.75% from 1 November 2026.

You can agree a different rate in your terms of trade, within the limits the law allows. Whether charging it is worth the relationship is your call. Either way, it is worth knowing that “late” has a legal price.

I am not a lawyer. Have your terms of trade checked by one before you rely on them.

Six things that close the gap

1. Put the terms on the quote, not only the invoice. The client agrees to them before the work starts, when you have the most leverage.
2. Write the due date as a date. “Due 30 November” gets paid sooner than “30 days”.
3. Take a deposit on project work. My own system builds are paid in three parts: 40%, 40% and 20%. Nobody funds the whole job.
4. Invoice the day the work is done. Every day you wait to invoice is a day added to the loan.
5. Know when your client pays and who approves it. Many companies pay once a month. Miss their run by a day and you wait a month. Ask, by name.
6. Check your bank statement every week. Your accounts tell you who should have paid. Your bank statement tells you who did.

Find your own number

You can work out your own gap in five minutes.

Debtor days = money owed to you ÷ annual sales × 365

Compare it with your terms. The difference, multiplied by a day’s sales, is the cash you are lending your clients right now.

If you would rather not work it out by hand, a Cashflow Review does it from your bank statements: where the money came from, where it went, who pays late and what it costs you. From R2,950, within 5 working days of complete statements.

See the Cashflow Review

Related reading: How much does a website cost in South Africa in 2026?, Should my business use a WhatsApp chatbot? What it costs and what it can’t do and Five signs your business has outgrown spreadsheets.