Collecting payment for goods and services rendered is one of the many challenges that threaten stability of many entrepreneurs.

In fact, most entrepreneurs struggle with expensive loans or miss good opportunities when their debtors owe them a fortune.

Just imagine you were able to collect all the money your customers owe you. Perhaps if you are like most entrepreneurs you will have peace of mind and you will not need funding for smooth operations.

Most small businesses cash flow problems have everything to do with inability to collect receivables on time either because they are lax for fear of upsetting big customers or they are too generous at selling on credit and poor at collecting.

Thus, they provide the other business with interest-free money for operations.

If not well managed, failure to collect debts on time can wipe all the profits or turn from a profitable firm into unwarranted cash flow crisis.

There is absolutely no reason a customer should hold your payment past the due date especially after they have sold or consumed whatever you supplied.

Essentially, large stable firms that have been in business for long can afford to give their customers longer credit period without hurting cash flow or profitability, but not start-ups.

However, in reality, it is often the large companies with smart credit control systems that enjoy the benefits of timely payment, but unfortunately drag feet when it comes to paying their small suppliers who struggle with cash flow.

As a business owner, you must understand that getting paid is as important as making a sale. Failure to collect payment due to you on time may mean you struggle to pay your bills, take expensive loans or disappoint your own employees and suppliers by failing to pay them when others owe you money.

Collecting receivables on time is healthy for your business and a prerequisite of success.

You must design a good system that ensures you put friendly pressure on your customers to pay you on time.
First, develop a credit policy especially when dealing with new customers.

This policy should be informed by the terms you have with your suppliers. If for instance your supplier gives you 60 days credit period, you should strive to give your customers less days to pay to avoid a cash crunch.

Always be mean when it comes to credit sales. It is better to have stock than to sell and not get paid.

Thirdly, when you sell on credit, invoice as first as you deliver your goods. Let your customers understand just as they expect fast delivery of goods and services ordered, you expect payment without delay according to terms agreed.

This means you must clearly make the customer understand when the payment is to be made prior to delivery of goods and services, preferably in written form.

Do not agree to finance someone else’s business interest-free when bankers are financing yours at an interest.

Remember that a customer is not doing you a favour by buying from you. They had considered all other options and found you to be the best value for their money.

Therefore, your customers need you just as you need them and you should not use credit sales as unique selling proposition.

Fourth, where applicable demand advance payment or deposit before processing orders.

This may not work with large companies that may dictate your supply goods at their terms. In this case, study their terms and make provision for it.

If they promise to pay 30 or 60 days after invoice, do effective follow-up to ensure they do it.

Finally, ensure you supply goods against well issued and signed purchase orders.

Otherwise following up debt becomes hard and in the event of non-payment, you cannot take any legal action to recover your money.

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