As a small business owner looking to make your mark in the competitive world, debt collection can be a harrowing subject. You might be intimated by the whole concept of making calls to collect dues or you might find it embarrassing.

But as much as you hate it, you can’t disagree that debt collection is an important part of your business! After all, you’ve got ongoing expenses such as rent, utility bills, salaries, payroll taxes, and more to think of. If you’re not going to take care of your cash flow situations, your business is sure to spiral downwards.

Of course debt collection isn’t easy, but that shouldn’t worry you. By implementing the right strategies, you can be sure that you’ll get your dues on time. If you’re unsure of yourself, read on for some tips.

Have a Credit Policy in Place

While you may not particularly like issuing credit to your consumers in your company’s name by letting them pay after they’ve received products or services, doing so may be necessary for competitive reasons. That being said, the impact of unpaid debts can take a toll on any business. As such, it would do you good to have a credit policy in place.

Remember that the efficiency of your cash collection process depends on how good and detailed your credit policy is. Start with defining who gets credit how much credit- not extending credit to individuals or businesses showing up as risky can save you from potential losses!

Do check if your consumers have a history of paying late, tax liens, or other problems listed on their report. By running a thorough check, you’ll be able to decide who needs to pay up front. Note that an individual or business that has emerged from bankruptcy won’t necessarily have strong financial footing.

Furthermore, clearly lay out what actions will be taken against a consumer they fail to make timely payment. Discuss the guidelines of your credit policy with your consumers in advance so that they know what to expect. Also ensure that your employees are well aware of any policy changes.

Be Proactive

Every business owner knows that a sale isn’t complete until the customer or client pays up. But you don’t have to wait until a consumer fails to pay to get into action! Instead, just be proactive to speed up your transactions.

Here are a few pointers to keep in mind.

  • While discussing credit policies with customers or clients in advance is advisable, do note how your company is interacting with them. Communicate via e-mail, fax, or voice mail, and use imaging, EDI, or electronic bill presentment to your advantage.
  • Review your company’s procedures and make sure you aren’t at fault for delaying payments. Perhaps your consumers didn’t pay because shipments weren’t accurate, delivery and quality promises weren’t fulfilled, or invoices weren’t sent on time or were inaccurate.
  • Update your Accounts Receivable management software- an ineffective system can slow down the process while being unable to improve credit to cash conversions.

Standardize Billing Procedures

Standardize your company’s billing procedure by including all monthly statements and communications with invoices. Invoices should also include all important details, including purchase date, payment terms, and due interests.

If a customer or a client defaults on their payment, initiate a staged process of communication including mail, e-mails, and phone calls. If the customer or client was attended to by a sales person, involve the employee in the collection process. If the salesperson had developed a good rapport with the consumer, cash collection can get quite easy.

In addition to this, avoid extending payment terms beyond a period of 30 days, especially when the economy is tight. And again, avoid extending credit to customers or clients who aren’t in a position to repay.

Develop a Collection Plan

Developing a collection plan and sticking to it can also prevent payment delays. Call up customers or clients a week before the payment due date and find out if they received products or availed services. Resolve disputes, if any and ensure that the consumer is aware of the due date.

Do call up the consumer within a week after missing out on the due date and get a commitment from them. If they fail to pay within 90 days after the due date, enlist the help of a legal expert or a collection agency. You’re better off leaving the job to professionals than wasting valuable sources to recover payment.

Make It Easy for the Consumer to Pay

Implementing this cash collection strategy means creating a win-win situation for yourself as well as for your customers or clients. Check out these tips on making things easier for your consumers:

  • Consider revamping your billing cycle- instead of once a month, run a check twice a month or once weekly. This way, if you miss out on a payment, you won’t have to wait too long for the next billing date.
  • Offer a range of payment options including credit card, debit card, fleet card, corporate purchasing cards, etc. Also consider making use of remote deposit services to enable faster access to funds.
  • Implement part payment options for long-term services or services that require your company to spend on materials. For long-term services, you can also set up a subscription system. Do give customers the option to pay in installments.
  • Make it mandatory for consumers to pay a minimum value by the payment due date. Additionally, offer discounts for immediate payment or for payments made well before the due date.


There’s no turning away from cash collection when you’re running a business. The key to being successful is anticipating problems from the start and working to develop effective solutions.

With the tips given here, you will certainly be able to have your cash flow system on track. So get started on planning right as soon as you can.