Every Singapore SME lives or dies by its cash flow, and for most small businesses the single biggest pool of trapped cash is money owed by customers. Accounts receivable, the invoices you have raised but not yet been paid for, can quietly grow until you are profitable on paper but unable to pay your own suppliers or staff. Credit control is the discipline of turning those invoices back into cash quickly and predictably.
This guide explains, in plain language, how a Singapore company should manage accounts receivable and run a practical credit control process, from setting credit terms to chasing late payers and knowing when to escalate. It is written for business owners and finance staff, not accountants, and forms part of our ongoing series on setting up a basic chart of accounts and everyday bookkeeping for SMEs.
What Accounts Receivable Really Costs You
Accounts receivable (AR) sits on your balance sheet as a current asset, but it is not cash. Until a customer pays, that value is only a promise. The longer an invoice stays unpaid, the more it costs you in three ways: the opportunity cost of cash you cannot use, the risk that the debt is never collected, and the administrative time spent chasing it.
A simple way to see the scale of the problem is the Days Sales Outstanding (DSO) figure. Divide your total receivables by your annual credit sales, then multiply by 365. A DSO of 30 means you are collecting, on average, within a month. A DSO of 75 means over two months of your sales are locked up as unpaid invoices at any given time. Tracking DSO monthly tells you whether your collections are improving or slipping, and it pairs well with the cash-focused view in our guide to the company financial statements.
Set Clear Credit Terms Before You Sell
Credit control begins before the invoice, not after it. The most common mistake SMEs make is extending informal, undocumented credit to anyone who asks. Every customer relationship should start with agreed terms in writing: the payment period (for example, 14 or 30 days), the currency, any deposit required, and the consequences of late payment.
Run a basic credit check
For new business customers, a quick check protects you. You can buy a business profile or ACRA extract for a Singapore company to confirm it is live, see its directors, and gauge how long it has been trading. For larger orders, ask for a deposit or partial upfront payment. Setting a sensible credit limit per customer, and refusing further supply once it is breached, prevents a single bad debtor from sinking your quarter.
Make your invoices easy to pay
Late payment is often caused by friction, not refusal. A compliant, clear invoice removes excuses. It should carry a unique number, the invoice and due dates, your company and GST registration details, a precise description, and your bank or PayNow details. If you are GST-registered, the invoice must meet IRAS tax invoice requirements, which you can confirm on the IRAS website. Send the invoice the moment the work is done, not at month end.
A Practical Credit Control Routine
Collections work best as a scheduled routine rather than a panic when cash runs low. A workable rhythm for a small business looks like this:
| Stage | Timing | Action |
|---|---|---|
| Invoice issued | Day 0 | Send invoice with clear due date and payment details |
| Friendly reminder | 3 days before due | Short email confirming the invoice and due date |
| First chase | 1 to 3 days overdue | Polite email or call; confirm the invoice was received |
| Second chase | 7 to 14 days overdue | Firmer reminder; ask for a payment date in writing |
| Final notice | 30 days overdue | Formal notice, hold further supply, warn of escalation |
| Escalation | 45 to 60 days overdue | Letter of demand or recovery action |
The key is consistency. Customers quickly learn which of their suppliers chase promptly and which do not, and they pay the promptest first. Keep every reminder professional and factual; the goal is to be paid and keep the relationship, not to win an argument.
Ageing Reports and Bad Debt Provisions
An accounts receivable ageing report groups unpaid invoices by how overdue they are, typically in buckets of current, 1 to 30 days, 31 to 60 days, 61 to 90 days, and over 90 days. Reviewing it weekly tells you exactly where to focus your chasing effort. Any invoice sliding into the 90-day-plus column deserves a decision: escalate, negotiate a payment plan, or write it off.
When a debt is genuinely unlikely to be recovered, prudent accounting requires you to recognise it. Under Singapore financial reporting standards, you make a provision for doubtful debts (an expense) so your accounts do not overstate the value of your receivables. Specific bad debts that are written off may also be deductible for tax if they meet IRAS conditions and were previously included as taxable income. Good bookkeeping here connects directly to your year-end position and your Estimated Chargeable Income filing.
When to Escalate a Debt
If chasing fails, Singapore gives you clear recovery routes. A formal letter of demand often prompts payment on its own. Beyond that, small claims and the courts are available depending on the sum owed and the nature of the dispute. We cover the full path from demand to judgment and enforcement in our detailed guide to recovering unpaid debts from another Singapore company. Escalating early, while the debtor is still trading, gives you a far better chance of actually collecting than waiting until they are insolvent.
Incentives, Payment Plans and Deposits
Chasing is only one lever. You can also shape behaviour before an invoice falls due. A small early-settlement discount, for example a modest percentage for payment within seven days, can pull cash forward from customers who value the saving. Deposits and staged billing on larger jobs mean you are never fully exposed to a single non-payment. For a customer in genuine difficulty, a written payment plan with fixed instalments is far better than an unpaid balance drifting indefinitely; it converts a stalled debt into predictable cash and keeps the relationship intact.
Whatever tools you use, document them. Agreed discounts, instalment plans, and deposit terms should be confirmed in writing so both sides know where they stand and your bookkeeping reflects reality. This clarity also feeds a cleaner month-end close, since your receivables ledger matches what has actually been agreed.
Assign Clear Responsibility
Credit control fails when it is nobody’s job. In a small business the owner often handles it informally until it slips. Naming one person responsible for issuing invoices on time, running the weekly ageing review, and sending reminders on schedule is the single change that most improves collections. That person does not need to be senior; they need to be consistent. Where the team is stretched, outsourcing the routine to a bookkeeping provider gives you the same discipline without adding headcount.
How Good Credit Control Protects the Whole Business
Tight receivables management does more than improve cash flow. It reduces the working capital you need to fund, lowers your exposure to any single customer, and gives you accurate numbers for planning. It also feeds directly into your monthly close: reconciling what customers owe against what has actually landed in the bank is a core step in a clean set of books, which we cover in our companion guides on cash versus accrual accounting and month-end closing.
For many owners, the most efficient answer is to hand the routine bookkeeping and reminders to a professional team so collections happen on schedule without consuming management time. If you would like help setting up an ageing report, credit control process, or outsourced bookkeeping for your Singapore company, our accounting team is happy to assist.
— The Editorial Team, Raffles Corporate Services