Every small business owner knows that getting paid on time is key to maintaining cash flow and running a successful operation. But in the same vein, most business owners know the pain of chasing overdue payments as well.
Knowing what to do when a client doesn’t pay can be a challenge. On the one hand, you want to resolve the issue as soon as possible and ensure it doesn’t happen again. On the other hand, you don’t want to burn bridges by entering into a formal debt recovery process too early.
Most of the time, payment issues can be resolved with a polite but honest conversation, or by reviewing the payment terms. But if need be, there are actions you can take to escalate the situation.
1. Look over the payment terms
Before you reach out to the customer, double check the payment terms to confirm that the payment is overdue.
It’s also a good idea to see if the customer has outlined any specific terms of payment that you may have overlooked. At this stage, the situation could be a simple misunderstanding.
2. Reach out with a payment reminder
If a payment has recently become overdue, send a polite payment reminder or follow-up invoice by email. Make sure to include the due date, payment options, banking details and your contact information.
Accounting software can make following up on late payments easier because you can sort invoices by client name or due date, and set up automatic invoice reminders for overdue payments.
3. Put it in writing
If your previous payment follow-ups have been unsuccessful, you can consider sending a more formal letter of demand. This usually serves as a final payment reminder, and lets the person know you plan to take legal action if you don’t get paid.
You can write a letter of demand yourself or have a debt recovery lawyer write it. However, you should consider this option only after you’ve exhausted other avenues, because it could negatively impact your relationship with the customer or client.
4. Get professional help with debt recovery
If your customer refuses to pay an invoice even after trying the options above, you might need to seek external help to solve the issue. This could include:
- Talking to the Singapore Mediation Centre (SMC), which provides a range of dispute resolution services.
- Filing a claim at the Small Claims Tribunals (SCT).
- Lodging a complaint with the Competition & Consumer Commission Singapore (CCCS), if the customer or client is a business.
You might also want to consider taking legal action for non-payment by seeking advice from a debt recovery lawyer in Singapore – but keep in mind that the legal fees may be larger than the payment owed to you.
If you do go down this route, collect as much information as you can about the work carried out and the payment terms, as well as records of your correspondence.
Tips for getting paid on time
Of course, your ultimate goal as a business owner should be to get paid on time and avoid overdue payments and debt recovery altogether. Here are some of the best ways to ensure payments are timely and accurate:
Include all the essential details on your invoice
- Your business details
- Your client’s details
- Invoice number and date
- Itemised descriptions of the goods or services provided
- The total amount due, including taxes if applicable
- PO number or reference number
- Payment terms, including how the customer can pay you and any penalties for late payments
Offer flexible online payment options
By offering your client multiple payment options – such as online bank transfer, credit card and a third-party service like PayPal – you’ll improve your chances of getting paid on time.
Send regular invoices
Sending invoices on a regular basis – such as weekly or monthly – cuts the time down between sending out an invoice and getting paid.
Use invoicing software
Invoicing software like QuickBooks Online allows you to create and send invoices quickly from any device, in any location. You can also store client information for future invoices, set up recurring billing, and trigger automatic reminders to be sent if payment isn’t made on time.
If you’re curious to see how invoicing works in QuickBooks Online, try it free for 30 days.