Running a business on credit is one of the most professional things you can do, whilst also becoming one of the most risky. As soon as you offer credit to your customers you are opening yourself up for severely late payment, or worse still, no payment at all, which can be crippling for any business. For this reason it is imperative that you maintain strong credit control to minimize the risks to your business without damaging customer relations.

The first line of defense against late and non-payment of credit terms should be to restrict to whom you offer credit. By keeping tight reins over who qualifies for credit from your company, you should be able to weed out the non-payers, late-payers, and those you just can't trust for whatever reason. This way, you should only have credit offered to proven customers who have paid promptly in the past, which should limit credit problems and cash flow issues from even arising.

If you do happen to come across a customer who hasn't paid his bill on time, it is good courtesy to send a reminder letter of two first. Make sure the tone isn't too heavy - there may be a good reason for you not receiving the payment, or the customer might just be running a bit behind. Either way, it's important that you don't damage your reputation or your relationship with the customer by simply going straight in there with the legal language. In your reminder notice, politely ask for payment within seven business days, or even fourteen depending on the importance of the customer. If payment still hasn't appeared after that, it might be time to start raising the tone.

After you've sent your reminder letters, it's time to send a more strongly worded notice. This should ask for payment within five or three working days to avoid further action. If again you receive no response, you should certainly follow this up with a call, stressing the urgency of receiving payment and you intention to take further action to realize your remedy.

Finally, if this yields no results, it's time to involve the lawyers. A legal letter is very effective at converting late payments, and can be one of the best ways to avoid legal action. Of course, there are legal remedies open to you should this fail to yield the desired result, but by taking these steps first, you should hopefully be able to avoid this eventuality.