The collection of unpaid invoices is an inevitable task for every company. Whenever a payment needs to be collected, you can follow the following steps: sending payment reminder letters, negotiating a repayment plan in instalments with the debtor, and finally taking legal action.
Step 1: Send payment reminder letters
A First Payment Reminder Letter is a short and simple reminder to repay an outstanding debt. This letter can help you secure overdue payment from a client or customer and ensures that you have a record of requesting payment.
A Second Payment Reminder Letter is a document used to recover a debt that is owing to you or your business after you have already issued a First Payment Reminder Letter. This letter serves as a follow- up reminder, and the tone of this letter can be more direct than the first.
A Final Payment Reminder Letter is a clear and firm letter demanding payment. A Final Payment Reminder Letter states how much is owed, why it is owed, and when the invoice must be paid. It is often the final reminder letter before taking legal action if the debt is still outstanding by a particular date.
Step 2: Negotiate an instalment payment with the intended defendant
A Letter Accepting Payment in Instalments is a concise letter accepting debt repayments in instalments from your debtor. It sets out the amount as well as the time by which the debt has to be repaid.
Step 3: Take legal action
If the debtor has not paid a debt despite being sent reminders, you may consider taking legal action as the last resort.
Under Hong Kong Law, if your claim involves a debt of HKD 50,000 or less, you can take action at the Small Claims Tribunal. Under Singapore Law, if your claim involves a debt of SGD 10,000 or less (or SGD 20,000 where the claimant and the respondent consent in writing), you can take action at the Small Claims Tribunals.
However, before doing so, you should read the instructions on the Small Claims Tribunal(s) website. Court action can be time consuming and you will incur fees without the guarantee of recovering your debt.
For a debt in excess of the amounts stated above, you may connect with one of our trusted advisors here.