Supplier payment risk

Supplier payment risk includes cash committed before goods can be checked, uncertainty about what releases each amount, paying the wrong account and difficulty resolving a disputed invoice. Manage it by agreeing each amount and trigger, reviewing the required evidence and checking approved payee details separately.

Without clear terms, a party may pay late, dispute the payment or refuse to pay. This can leave the business exposed to cash loss or delay.

Key risks and controls in supplier payments

Identify the exposure before ordering

Record the contracting and invoicing entity, product version, quantity, price, currency, delivery point and payment terms in the order. For each instalment, state its amount and trigger, and resolve any difference between the invoice and agreed order before paying.

At each stage, record the amount due and the cumulative amount already paid to see how much cash is exposed before the next evidence review. A deposit may commit cash before finished goods exist, while a later payment gives the buyer a review point only if the agreed evidence can be assessed before payment is due.

When economic conditions tighten, delayed payments and unpaid invoices can be early signs of trouble for a supplier. If your business is exposed to that supplier, monitor changes in its payment behaviour.

Before paying: Key checks to reduce supplier payment risk

Put payment terms in the contract

Payment terms are the rules for how and when payment is made. For sales, they form part of a sales contract under contract law and should state accepted methods, such as cash, bank transfer or credit card, and when payment is expected: all up front, in instalments, on delivery or after 30 days if credit is offered.

Payment terms should also cover conditions attached to payment and how overdue payments and debts are collected. Clear terms can help reduce financial risk and disputes.

A supply contract should say what products the supplier will provide and what conditions count as completion. It should also state how much, when and how the buyer will pay, who is responsible for faulty or incomplete goods, and how both parties will handle disputes; use plain English to reduce misunderstandings.

Payment terms in contract: What should be included

Make payment triggers specific

Agree what event makes each amount due, what evidence the supplier must provide, who reviews it and how long that review takes. The event might be approval of an identified sample, completion of a defined production stage or acceptance of a specified shipment lot.

State what happens if the evidence is incomplete or a check fails. A supplier’s progress update is distinct from the buyer’s acceptance of an agreed milestone, so allow time for inspection or testing before payment if those checks are required.

Several instalments can still leave most of the price payable before the goods can be checked. Also specify who is responsible for faulty or incomplete goods.

Verify the payee separately

Compare the approved payee details with the payment instruction as a check separate from reviewing the invoice or goods. Matching payee details does not establish that the goods meet the order or that a payment trigger has been met.

If bank details change, pause payment and follow the separate changed-bank-details verification process before paying. See our supporting guide to verifying changed supplier bank details.

If a transfer may have gone to fraudulent details, contact the bank immediately.

Steps to verify payee details before payment

Watch for payment redirection scams

Scammers may pretend to be from a business you have used and send an invoice with new payee information. The aim is to redirect a legitimate payment to a scammer, so you believe you are paying for the goods you ordered while the money goes elsewhere.

An invoice that matches the products ordered does not confirm that its new payee details are genuine. Treat changed payment details as a separate verification issue before transferring funds.

Keep the decision traceable

Retain the order and approved changes, milestone evidence, invoice, payee check where relevant, approval and transfer record. A transfer record shows that money was sent; it does not establish that the intended supplier received it or that a disputed milestone was met.

For a disputed amount, identify the invoice line and agreed term, check the contract’s notice and dispute process, and put the issue and requested outcome to the supplier in writing. Keep the decision tied to the relevant contract terms and evidence.

Document contract variations and state if the contract can end early.

If a dispute escalates

The ACCC accepts reports where a person considers a business is doing something it should not. It uses reports to inform its education, compliance and enforcement work, investigates anti-competitive behaviour that may be illegal, and can take action against businesses that break the law.

The Australian Consumer Law (ACL) is part of the Competition and Consumer Act 2010 (Cth) and includes protections for small businesses and consumers from unfair terms in standard form contracts. State and territory consumer protection agencies manage individual complaints and may offer voluntary dispute services; Australian courts and tribunals can enforce the ACL.

The ACCC does not intervene directly in disputes and does not give legal advice.

Managing dispute escalation under Australian law