Cash flow is very important to a startup. One important determinant of cash flow is the collection of account receivables.
Going after unpaid account is a delicate balance between spending valuable time and resources going after it and spending the same time and resources on the business. Unpaid account is also a source of stress that can distract the focus on running the business.
With limited time and resources what can a small startup company do? Here I share my recent experience with a frustrating account and my options. This matter is still on-going and the discussion may not represent my final choice of action.
A common wisdom is "not all customers are profitable". This is indeed true and the starting point to avoid bad account is simply not to accept them in the first place. This can be tough decision for a small startup. Besides, there is usually nothing in the beginning to indicate if a client would default.
Once payment default occurs, the natural reaction is to feel frustrated and inclined to act on impluse. Restrain that and stay professional.
The issue can be further complicated if there are sub-contractor involved and their payment depends on the account being paid.
In my case I was the end developer, I also engaged the service of a freelancer to do part of the work. My immediate client was in turn engaged by another company to do the job.
I had been in tussle with my client for the past few months. In my search for ways to resolve this, these are some mode of resolutions available in Singapore.
- DisputeManager.com
This is a service setup by Singapore Mediation Centre with the support of the Ministry of Law and the Singapore Academy of Law.
Among the services provided,e-Settlement looks promising. The other services are too prohibting expensive for smaller dispute like non-payment. - Small Claims Tribunals
This is a traditional route and the cost is reasonable.
Not exceeding $5,000 Exceeding $5,000 but not exceeding $10,000 Exceeding $10,000 but not exceeding $20,000 Non-consumer $50.00 $100.00 3% of claim amount The website provides good information about how to lodge a claim.
- e@dr
This looks similar to DisputeManager.com but covers "disputes which arise directly or indirectly out of e-commerce transactions. This includes disputes on the sale of goods and provision of services, as well as disputes on intellectual property rights and domain names."
It looks promising for my case.
Thoughts on the resolution methods
- One drawback I can see in using this method is that the other party must agree to use it. (Refer to how it works.) What happen if they don’t agree? There is no way to compel them to comply. On top of the fees paid, the amount claimed is likely less due to the way it works.
- This is the traditional method and likely the most effective against client that refuse to yield. On the other hand it require time and energy to file the claim and attend hearing.
- e@dr is an interesting concept especially since it is targeted at ecommerce. This would definitely come in handly in future.
Although there are avenues for resolution, the best defence is still to avoid it in the first place. This begins with choosing the right client and so far my best client are referral clients.
Resources:
- Small Claims Tribunals
- e@dr (eAlternative Dispute Resolution)
- DisputeManager.com
- Resolving Business Disputes on business.gov.sg
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