Getting paid by government: invoices, payment terms and cash flow

Governments are reliable payers. They rarely go out of business or refuse to pay. But they can be slow, especially the first time, and an invoice with the wrong details can sit in a queue for weeks.

Typical payment terms

• Canada: federal departments generally aim to pay within 30 days of a correct invoice or acceptance, with interest due on late payments in many cases. Ontario and other provinces have prompt payment rules in some sectors.
• US: the Prompt Payment Act generally requires federal agencies to pay within 30 days, with interest for late payment, and some agencies aim to pay small businesses faster.
• UK: public bodies are expected to pay undisputed invoices within 30 days, and central government aims for faster payment, often within 5 days for many invoices.
• EU: the Late Payment Directive sets 30 days as the general limit for public authorities.
• Australia: the Commonwealth has a policy of paying many small business invoices within 20 days or fewer.

Always check your contract, which sets the actual terms.

Why payments get stuck

• The invoice doesn't quote the purchase order or contract number.
• The milestone hasn't been formally accepted.
• The invoice goes to the wrong address or system.
• You're not set up as a supplier in the buyer's finance system.
• Tax details are missing or wrong.
• The approver is on holiday.

How to get paid faster

1. Get set up as a supplier on day one. Complete the vendor forms, banking details and tax registrations.
2. Ask how they want invoices: format, portal, required fields, who approves.
3. Design milestones you can hit early. A first payment for a discovery report in month one beats a single payment at go-live.
4. Get written acceptance of each milestone before invoicing.
5. Invoice promptly and keep a log of what's due and when.
6. Follow up politely at 30 days, with the contract and invoice numbers.

Plan your cash flow

The first payment on a new public contract often takes longer while systems are set up. Plan for 60 to 90 days of costs before the first payment arrives, especially if you're hiring or buying equipment. Some firms use invoice financing for government receivables, which lenders often see as low risk.

Common questions

How long does government take to pay invoices?

Usually around 30 days from a correct invoice, though the first invoice on a new contract can take longer. Check the contract for the exact terms.

Can I charge interest on late government payments?

In many countries, yes. Rules such as the US Prompt Payment Act and the EU Late Payment Directive provide for interest on late payments. Check your contract and local rules.

Do government contracts pay upfront?

Rarely. Most pay in arrears for work done or milestones accepted. Subscriptions and licences are sometimes paid annually in advance.