If you’re like many small businesses, even a few late payments on your accounts receivable can seriously affect your cash flow. It is critically important that you take immediate and consistent steps to limit the number of past due accounts receivable you have at any one time. Strategy number one is to have a system that limits the number of accounts that expire in the first place. There are numerous tools and strategies to do just that. However, today we will focus on how to deal with delays once they appear.

Here are some tips to help you reduce your outstanding accounts receivable:

· Address the problem immediately. Never wait more than 3 business days after the expiration date to contact the customer. This allows for mail delays, but is early enough to catch a situation before it gets worse.

· When communicating with customers, don’t give them an excuse to use (“Did you get your bill?”). Instead, ask them, “When did you send in your payment?” If they tell you it hasn’t shipped, ask them if they plan to ship it today. If they say “no,” ask them when they expect to ship it. Get a commitment from them and follow up if the commitment is not met.

· Ask your customers why they haven’t paid their invoice. Remember, if they are honest with you, you should treat them with the utmost respect. Everyone has cash flow problems from time to time and your dealings with them will be remembered long after their problems are over and they are looking to buy products or services from you again. In fact, the proper etiquette when charging could not only result in getting paid faster, but also allow you to keep them as customers for life. You see, if they do in fact have problems, there are probably many who do not treat them very well and this will sour their relationship in the future.

If you get an excuse, take your emotions out of the equation and approach the situation logically. Get a definite commitment on a date or time frame for when you can expect to get paid from them. Make sure you agree, so there are no claims of misunderstanding later. Find out how (mail, credit card, etc.) and when. Then, note the conversation in your file so you can follow up immediately if the commitment isn’t met.

If they give you a good reason (“My product was defective”), try to remedy the situation, if it is within your control. For example, if you discover that the product was defective, make sure that a new, non-defective product is delivered to you immediately.

If your client is a larger company, understand that they will generally pay their invoices on a set schedule. You’ll need to know when your bills are due to include them in your weekly, biweekly, or monthly payment cycle. If you find yourself with an overdue debt from one of these companies, be sure to call or contact them several days before that time to make sure they have all the documentation they need to include your bill with your payments.

These are just a few of the many proven steps you can take to collect your accounts receivable once they are due. To limit future delay, you will need to review the entire process. To compete in business today, you will almost certainly have to have some level of credit for your customers. The key is to limit it to those who will pay you! If your process needs a review, it’s important to address that issue immediately. While sales are important, cash is still king!