As with most businesses, you probably sell on credit and ask your customer to pay an invoice within a set period of time, such as 30 to 60 days. During this time, you are basically loaning money to a customer, and expecting that the customer will pay you back. If the invoice is paid, you have cash to run your business. If it's not, you don't. Therefore, to be successful at all, you have to be paid on time.

Unfortunately, it's not always that easy to get paid. Almost every business has a customer or two who don't pay or who are slow paying. If you're not proactive and don't manage these receivables, you can quickly run out of cash. Here are some ways you can ensure customers will pay you on time.

1. Make sure customers are worth credit you give them and avoid customers that aren't. Before you accept orders, you can do credit checks and require credit applications. If the amount of purchase is big enough, you can ask for and receive financial statements. You should also set credit limits and hold to them.

2. Run aging reports and make sure you review them regularly. Aging reports help you understand how your accounts are dispersed; they'll show you which are less than 30 days old, 30 to 60 days old, 60 to 90 days old, or older. You and your staff should know how to interpret these reports so that you can spot problems early and take care of them. If necessary, assign someone specifically to follow up on problem invoices. The older invoices get, the more difficult they are to get payment for.

3. Send out invoices immediately. The sooner invoices go out, the sooner payments can come in. Your bills should also be detailed, clear and accurate. The more detail you include, the less likely it is that a customer can dispute charges.

4. Reward and penalize. Implement a plan whereby you provide incentives for prompt payment and penalties for late payments. For example, you could give customers who pay within 10 days a 2% discount. You can also automatically assess a penalty fee if a customer is more than 30 days late with payment, for example. Make sure you stay within any limits set legally, so that you don't get yourself into trouble.

5. Moderate your growth. If you have a significant increase in sales, this can greatly impact your company's receivables and needs for cash. Utilize the advice of a seasoned financial professional. He or she can help you develop a plan for growth. You can consider additional financing, utilize a line of credit at the bank, or consider price adjustments. You may need to sacrifice some growth in the short term to make sure that you don't overshoot your ability to pay your bills.

Successful companies continually seek new ways to improve their accounts receivable function because they know that improving the process can lead to significant financial gain. Fewer outstanding account balances mean fewer bad-debt write-offs and enhanced profitability. And a well-managed portfolio of receivables can boost cash flow and expand working capital.