The cash flow of most businesses mostly depends on invoices being paid timely. In any case, many clients are notorious for paying late. Many businesses will tell you that being paid on time by all customers is a rarity. If being paid on time has become a pain for your business, you can use these practices to try and ease the issue.
As usual, the first stage is sending an invoice. Once a customer fails to pay before or due date, the next step is overdue notice. If there’s still no positive response, try calling. The last and final step involves sending a legal notice, and while that’s rare, it happens.
Small businesses should consider following these steps while asking for payments from their clients:
Invoice receipt/confirmation. This step involves confirming if the client received the invoice or not. You need to write a professional email to the client informing them about the payment due. Confirm the receipt by your client before proceeding.
Develop a concise email to request payment. If it’s a week overdue, the next step is writing a quick email. Remind them about the previous communications and invoices and ask for acknowledgment, along with any necessary late payment fee. Attach old invoices before sending them to the client.
It’s preferable to send brief emails at regular intervals before and after the due date.
Call your client. If the client still hasn’t settled the payment after sending an email, the next step is to contact them directly. Remind them about the email and invoice and tell them that they’re late in paying dues. Inform them about all the payment options available as well as any on-time payment bonuses in the future. Maintain a calm and friendly tone throughout the call to keep the relationship on good terms.
Sometimes, payment issues arise because your preferred payment method is not feasible or difficult for the client. If you’re in Singapore, consider using the MAS Electronic Payment System (MEPS), a local interbank payment and settlement system that lets you receive money quickly with optional SMS or email alerts when payments are processed.
Cut off future work. If the client isn’t paying the overdue invoice despite everything above, you will have to proceed with this. Cutting off all future deals or existing project milestones can work to encourage them to pay. With reason, explain why you need to take this step.
Consider collection agencies. You can hire a reputable collection agency if your previous efforts for collecting payment fails. The agency has strategies that will help you get your due payment from the client. Using a collection agency may cost you, but at least you’re getting something – it may also force the client to deal with you directly instead.
Check legal options. If all else fails, you will have to take this final step. You can file a case in court with all your collected proofs (invoices, emails, call records, contracts). Small businesses can take a client to a small claims court.
Is the issue because of payment method issues?
Some small businesses in Singapore aren’t aware of the same-day transfer of funds to recipient account using MEPS, which is currently the fastest way to transfer Singapore Dollar funds between banks in Singapore. Check this out and see if it will benefit client payments.
The best way to make sure that you will be paid for your product or services is by setting a set of proactive policies and procedures to minimize the number of delinquent accounts receivable you will deal with.