How to Prevent Collection Delinquencies
by Barbara Weltman on September 9th, 2009
Most businesses are feeling an economic pinch, with record oil prices, increased inflation and other hiked expenditures making it a challenge to ensure that cash flow keeps pace with expenses. NFIB has reported that 30% of the 65.7% of businesses with cash flow concerns say that difficulty collecting money owed is the main reason. What can you do to keep from finding yourself in the uncomfortable position of being a bill collector or, even worse, failing to get paid the money that’s owed to you?
Limit credit to customers
If you have been extending credit to customers, consider a change in policy. You can:
- End sales on credit. Require customers to arrange their own credit, by charging purchases to a credit card or arranging their own bank loans.
- Restrict credit to “good customers.” Check the credit ratings of customers you want to give credit to. Obtain permission from customers to do this. Then, for consumer customers, contact one of the three main credit reporting companies (Equifax, Experian or Transunion. For business customers, check with Dun & Bradstreet or another business credit-reporting company.
Improve collection practices
If you do sell on credit, because it is industry practice or you believe the customer will pay you, make sure that you take steps to help collections:
- Bill promptly. Don’t wait until the end of the month to send out bills for work completed or goods sold during the month.
Barbara Weltman
Barbara Weltman is an attorney, prolific author with such titles as J.K. Lasser’s Small Business Taxes, and trusted professional advocate for small businesses and entrepreneurs. She is also host of Build Your Business radio and the publisher of Idea of the Day℠ and monthly e-newsletter Big Ideas for Small Business® at www.barbaraweltman.com.