Getting paid by your customers 

Collecting the money that your customers owe you can be an arduous, stressful task if you don't approach it in a consistent manner. However, ensuring that you're getting paid on time is an essential aspect of business that will help you maintain positive cash flow. Just as your suppliers expect you to pay them on time, you, in turn, must require the same of your customers.

Keep the following tips in mind when you're managing the collection of your invoices.

Invoice immediately: It's vital to your cash flow to invoice your customers as soon as you supply them with a product or service, as opposed to doing your invoicing at given intervals (on the last day of each month, for example). If you hold off on sending your invoices, you end up carrying your customer's debt for a longer period of time.

Organize your collection system: Dedicate one person to handle collections and ensure they keep clear, specific notes on all interactions with your customers.

Set up a pre-determined contact system: You want your customers to know that you take your billing seriously and that you handle it consistently. Implement a system that deals with how and when you contact your customers about past-due invoices.

At least the first two past-due notifications should be made via telephone, and these should be made exactly X number of days past the invoice due date. Subsequent contact should also occur at pre-determined intervals. For example, you could contact your customers when their payment is exactly one month late and every 14 subsequent days, until their payment is made. Remember to keep detailed notes of each interaction.

Once you have made two or three notifications over the telephone and have still received no response in the form of payment, you will want to make subsequent notifications in writing. This will allow you to formally document your interactions with your non-paying customers, should you choose to take legal action down the road. You may even decide to send such notifications via certified mail.

Script it: Create a script for every interaction you will encounter with non-paying customers. Pre-drafted letters and phone scripts for instances of past-due invoices and failure to make promised payments will enable you to be direct and consistent with your customers.

Reward early payment: A great way for you to encourage timely payment of your invoices is to offer an early payment incentive. For example, customers who pay within 10 days receive 2% off the pre-tax invoice. If the 2% hit is too much for you to handle, you may even choose to increase your prices by 2% before implementing the reward program. Likewise, you might consider charging late fees on past-due invoices. However, if you do so, be sure to mark this clearly on the invoice; your customer needs to know if there are penalties for late payment.

Partial payments: Consider invoicing in portions, for example, half up front, half on delivery.

Know your customers: Try to keep an ongoing dialogue with all your customers. Get to know them, the products and services they like and, equally important, their spending habits and credit situation. Reviewing their credit history periodically is a good habit to get into; you can always decrease or eliminate the credit they have with you, if necessary. A properly managed customer relationship management system can be an effective way to handle your customer knowledge base.

Take it seriously: The time to take serious action regarding late payment is when several of your requests have turned up no response. If an invoice ever exceeds 90 days past due, don't hesitate to ramp-up the pressure; the use of a collection agency or legal action may be your only means of getting paid.

• What is customer relationship management?

  In today's competitive market, it is vital for you to manage your relationships with your customers systematically, efficiently and profitably.

• Legal issues

  Do you really need a lawyer? Find out when to hire a lawyer and how you can reduce potential legal costs.

• Online sales

  Learn how to set up a secure payment system for your online sales.

• Make a great statement!

  Find out how you can redesign your bills and invoices to improve your cash flow and your relationships with your customers simultaneously.

• Getting paid: Understanding export transactions

  Now that you've arranged to export goods to an international buyer, how do you get paid? Learn about the different methods of payment.