If you are like many small businesses, even a few late payments on your accounts receivable can seriously crimp your cash flow. It is vitally important that you take immediate and systematic steps to limit the number of past due receivables that you have at any time. The number one strategy is to have a system in place that limits the number of accounts that go past due in the first place. There are numerous tools and strategies for doing just that. However, today, we will concentrate on how to deal with the past dues once they appear.



Here are some tips that will help you to reduce your outstanding receivables:

?Address the issue immediately. Never wait more than 3 business days past the due date to contact the customer. This allows for mail delays, but is early enough to catch a situation before it becomes worse.

?When you contact customers, don't give them an excuse to use ("Did you receive your invoice?"). Rather, ask them, "When did you send your payment?" If they tell you it hasn't been sent, ask them if they intend to send it today. If they say "no," ask when they expect to send it. Get a commitment from them and follow up if the commitment is not honored.

?If they haven't scheduled it, ask them if they intend to pay the bill. If they say "no," ask them why. Once you have the reason, hang up or walk away. If you continue the call or visit at this point, you may be crossing over into harassment. You can wait a day or two and call back to confirm the customer's position, but don't call or visit more than twice if they say they don't intend to pay the bill. At this point, it's time to turn to a collection agency or lawyer.

?Ask your customers why they haven't paid your bill. Remember, if they are honest with you, you should treat them with the utmost respect. Everyone has cash flow issues from time to time and your treatment of them will be remembered long after their problems are over and they are looking to purchase products or services that you offer again. As a matter of fact, proper etiquette when collecting could not only result in you getting paid more quickly, but can also allow you to keep them as customers for life. You see, if they are indeed having problems, chances are there will be many who will not treat them very well and this will sour their relationship going forward.

?If you get an excuse, remove your emotions from the equation and address the situation logically. Get a definitive commitment on a date or time frame for when you can expect to receive payment from them. Make sure you are in agreement, so that there can be no claims of misunderstanding later. Find out how (mail, credit card, etc.) and when. Then note the conversation in your file so that you can follow up immediately if the commitment is not honored.

?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 find that the product was indeed defective, make certain that a new, defect free product is delivered immediately.

?If your customer is a larger company, understand that they will generally pay their invoices on a set schedule. You will need to know when your invoices need to be received by them in order to be included in their weekly, bi-weekly, or monthly payment cycle. If you find yourself with a past due from one of these companies, be sure to call or contact them several days prior to that time to make certain that they have all the documentation they need to include your invoice with their payments.

These are just some of the steps you can take to collect your receivables once they are past due. To limit future past dues, you will need to revisit your 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 an overhaul, it is important to tackle that issue immediately. While sales are important, it is still cash that is king!