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How do I make sure I get paid – Debt prevention 101

Patrick Lim
Partner at Raj, Ong & Yudistra

Debt collection. Some will say it is the bread and butter of quite a few litigation law firms. It is also the one component of running a business that could be the difference between sustainability and total ruin. Sounds dire.

In line with all our recent articles (legal audit series and AI language commentary, selfless plug, go read them, they are good reads), the standard modus operandi here is usually, how do we prevent debt?

To be clear, this is not financial planning, debt management, or legal advice on the matter, even though the person writing it is a lawyer (selfless plug no.2). This is just observations on what we can term best practices to adopt to prevent payables becoming debt – debt being outstanding payments past due, to be exact.

Here is the sizzle of the steak, so to speak. The TLDR list of what we will be covering in this series of articles (yes, another series). The short steps will be provided below. The series is where we will look at each best practice and explore what practical steps that you can take to implement each of these steps.

Here we go (listed in the order of what it would potentially cost):

  1. Develop a clear invoicing policy (Low cost): This involves establishing written guidelines, which require only your time and effort to create and communicate.
  2. Be consistent with invoicing (Low cost): This practice involves developing a habit of sending invoices promptly and requires no additional financial investment.
  3. Include all relevant information (Low cost): Ensuring your invoices contain necessary details is crucial and can be done without incurring additional costs.
  4. Set payment terms (Low cost): Clearly stating payment terms on your invoices requires only your time and effort to implement.
  5. Maintain a professional approach (Low cost): Adopting a professional and respectful tone when dealing with clients does not require any financial investment.
  6. Document communication (Low to moderate cost): Keeping records of your communication with clients may involve using free or low-cost tools, or investing in a more comprehensive Customer Relationship Management (CRM) system.
  7. Monitor outstanding invoices (Low to moderate cost): Regularly reviewing unpaid invoices can be done manually or with the help of low-cost tools or software.
  8. Offer multiple payment methods (Moderate cost): Depending on the payment options you choose, there may be associated fees or setup costs for each method.
  9. Use invoicing software (Moderate cost): Invoicing software often comes with a subscription fee, which can vary depending on the features and capabilities you require.
  10. Implement payment reminders (Moderate cost): Sending reminders can be done manually or with the help of invoicing software or CRM, which may come with additional costs.
  11. Review and adjust (Moderate cost): Regularly assessing and improving your invoicing and payment management practices may require time, effort, and potentially investment in new tools or services.
  12. Develop a debt collection plan (Medium to potentially high cost): Depending on your approach, developing a debt collection plan may involve engaging a debt collection agency or seeking legal counsel, which can be costly.

Isn’t that a long list? Well, best practices are usually tedious and pedantic. If you have read this far and feel like finding out more, do drop a like and follow along the next article in this series where we will look at each point and try to identify the practical steps that you can take to start preventing debt in your business.

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