As a small business owner in Singapore, making a sale is only half the battle. Owners must also take steps to ensure that the invoices they send out are paid in a timely fashion. Cross-border business dealings are common in Asia, where business owners readily expand across their limited local markets.
As a result, geographical differences in payment terms and culture can significantly affect your business’ cashflow.
Payment terms define the period of time a buyer has to settle an outstanding balance as well as the acceptable methods of restitution. As the owner of a small business, you not only have to choose and define payment terms for your clients, but you must also adhere to the terms provided by your vendors and suppliers.
Why Payment Terms are Important
Payment terms can be used to help businesses receive payments on a predictable schedule, thus facilitating everything from budgeting, to paying salaries and more.
It’s important to remember that choosing and defining payment terms doesn’t mean you have to anger your current clients. On the contrary, payment terms can offer clients additional options for settling their debts, such as discount programs and lines of credit. In some cases, offering better payment options may even draw business to you from your competitors.
Below are some of the most popular payment terms featured on business invoices, along with their benefits and drawbacks.
Immediate payment refers to a transaction wherein payment is due at the time when products are delivered, with phrases like “Cash on Delivery” (COD) or “Payable on Receipt.” Should the buyer fail to make a payment at this time, the seller is legally able to repossess his or her goods.
While immediate payment can be beneficial for the small business owner, this term may inconvenience clients.
One of the most common payment terms (not only in Singapore, but around the world), Net 30 days (or “N/30″), means that a buyer must settle his or her account within 30 days of the date listed on the invoice.
Businesses may also set invoice terms to Net 60 or even Net 90, depending on their preferences and needs.
2/10 Net 30
Like Net 30 invoice terms, 2/10 Net 30 requires buyers to pay within no more than 30 days of receipt. However, this payment type offers a discount of 2% for clients who submit payment within 10 days and benefits buyers with additional cash balances to increase liquidity for the seller.
Line of Credit
Line-of-credit payment terms offer buyers credit toward the products and services they purchase. This type of payment term presents each buyer (usually large companies) with a monthly invoice, which is then paid via check or bank transfer.
Sending an Invoice
As the owner and operator of a Singaporean small business, you likely send multiple invoices each month. However, getting your invoice out the door is only the first hurdle. You also have to take steps to ensure your invoice will be paid in a timely fashion. Be sure to discuss payment terms before distributing products or services to clients.
It’s a good idea to keep industry standards in mind when choosing a payment type. You can find a sample invoice template below his article.
Receiving an Invoice
Most small business owners deal with both outgoing and incoming invoices on a regular basis. If you receive an invoice from a vendor, it’s important to pay close attention to the options for repayment so you don’t risk losing them. While some supplier invoices set rigid payment guidelines—such as requiring cash upon delivery—others offer the option of earning discounts by paying early.
While paying early may save you money in the long run, you should take steps to ensure that doing so won’t leave your business short on cash.
Communicate Payment Terms Clearly
It’s no secret that small business owners in Singapore have to contend with hectic schedules. Revamping your invoice system may seem like just one more thing to do, but it’ll save you time in the long run.
Set up a clear and specific invoicing system, and communicate payment terms to clients thoroughly. Be clear, timely and consistent in dealing with payment terms to boost your chances of getting paid on time.
Try our Free Downloadable Invoice Template if to make an invoice in minutes or read why personalized invoices matter and how to create them.