According to the 2022 Atradius Payment Practices Barometer survey, 54% of invoices are overdue in Singapore. Chasing your customers over overdue invoices is never a pleasant conversation, especially if they are key clients as you do not want to rock the relationship and jeopardise any future sales. However, following up on overdue invoices still needs to be done to ensure you get paid. Let us explore some tips and templates that can make the process of chasing late payment less painful and encourage your clients to pay on time, or better yet, pay earlier!
Timing is everything
It is important to be aware of your client’s payment pattern. If your client usually pays on time, it is best to wait for a few days or even a week after the invoice due date before following up.
On the other hand, if your client has the tendency to pay a little late, it may be useful to follow up on the due date itself.
If a follow-up email is required, Entrepreneur suggests to send such email on Tuesdays around lunchtime.
Establish a process
Ensure your business establishes a process for issuing and following up on invoices. For example, you could establish for your invoices to be issued every Monday and Wednesday. If there are multiple invoices to the same client, it is best to group them together and submit them in one go. Your client will likely appreciate this.
For invoice payment reminders, it is helpful to have a system to automate the process. For example, set up your system to send out reminder emails on the invoice due date for a selected client. A reminder email can also continue to be sent out at different intervals until payment is received (e.g. every 2 weeks or 30 days past the due date etc). Most accounting applications will be able to help you with this.
Appropriate language in reminder letters
Depending on how late or overdue the invoice is, different tones are required.
1-15 days past due
In Singapore, the average time B2B customers pay overdue invoices is 20 days past their due date. All it needs is just a friendly reminder that the invoice is overdue. The objective here is to communicate your concern gently whilst maintaining the relationship with your clients.
15-30 days past due
At this point, the delay is getting more significant. It is probably best to pick up the phone and speak with the relevant person on the status of your overdue invoices. You would want to understand if there are any disputes and find out when the invoice is scheduled to be paid. It is best to follow up your phone call with an email to have a record of what was discussed. Ensure you include all the relevant invoice information in your email for example:
- Invoice number, PO number.
- When the invoice was issued and its due date.
- How payment can be made.
- Contact details.
30-60 days past due
At this point, you may want to consider sending another reminder in the form of an email and a physical letter to your client together with the invoice again and any late charges (if applicable). The letter needs to be crystal clear that you need to be paid.
Ensure all the relevant client teams and personnel are aware of the situation. This includes your client’s finance department, accounts payable, and your business contact.
You should also consider a temporary pause in providing any further goods or services to this customer to minimise any potential bad debts. Do communicate this decision to your client prior to taking this action.
Source – QuickBooks
Subject line: [Your Business Name]: Invoice #XXXXX for [Product/Service] is 30 days PAST DUEBody:
Hi [Customer’s Name],
This email is to remind you that your invoice is now 30 days past due and I am seeking your immediate attention.
Our records show that we have not yet received payment for invoice #XXXXX in the amount of [invoice amount], which was due on [due date].
[Optional, if applicable] As your invoice is now past due, a late fee of [amount] has been assessed.
The outstanding invoice amount is [invoice amount plus late fees, if applicable] and is [number of days] past due. Attached is a copy of the invoice. You may make a payment here: [link to online payment or other payment methods].
Please let me know the status of your payment.
If your payment has already been sent, please disregard this notice. If you have any questions or concerns or would like to discuss payment plan options, please contact me at [contact number].
I appreciate you addressing this at your earliest convenience so we can work out this matter.
[Your Company Name]
90+ days past due
At this stage, the likelihood of recovering your overdue invoice is small. This is where you may want to consider:
- Taking a legal action against your customer.
- Engaging a debt collection service.
- Write the invoice off as bad debt.
Offer a payment plan
In some cases, your client may not have paid the overdue invoice as they may be facing cash flow issues. To help increase the likelihood of getting paid, you could offer a suitable payment plan that your client can meet. This could be for example breaking down the invoice amount into regular installments over an acceptable period.
You could even offer an incentive to your client to shave off some part of the invoice amount due or waive late fees if the payment plan is met.
Late payment penalty
If it is practical to include a late payment penalty as part of your sale terms and conditions, then you should. Ensure this late fee is stated clearly in the invoice. This can increase the likelihood of you getting paid on time.
However, if you are billing a large client, this may not always be possible as you may not want to rock the relationship.
Consider invoice finance
For customers who usually pay late, or if you just want to get paid faster without the uncertainty of when you will get paid, you may want to consider an Invoice finance facility. You can sell your outstanding invoices to an external financier and get immediate funds upfront for a small fee. This way, you are in full control of when your invoice will be paid and help you take control of your cash flow.