The customer is always right, but they don't always pay on time. Past-due accounts can be a death sentence for businesses already struggling to stay abreast of stock, operational costs and maintenance costs.
While they are a more extreme measure, collection agencies and lawsuits can help some businesses struggling to collect bad debts. Writer Carol Tice of Entrepreneur Daily Dose provided these simpler tips to steer clear of financial worries. The first step to keeping outstanding invoices in check is tracking payments carefully. This way, it's immediately apparent if a bill is overdue. If an account does run late, a friendly email or phone call can clear up billing issues quickly. For more difficult customers, try appointing an employee to make follow-up calls and track individual clients' payment progress. Offer payment plans and consistently resend bills, tacking on late fees for unresponsive customers. Switching to an electronic payment system can also speed up the billing process; clients get bills sooner, businesses receive payment faster. Going on the offense, business owners who frequently deal with late payers can research a consumer's credit history through a data support company. If the report doesn't look good, try extending less credit or requesting a 50 percent downpayment. Using an intermediary agency to place money in escrow is another option. Data from the Administrative Office of the U.S. Courts shows bankruptcy filings
slowed in 2010, but still hit a five-year high. The good news? Businesses accounted for only 56,282 of the total 1.59 million filings. In fact, more small businesses are applying for loans, suggesting a potential move to expand among entrepreneurs. The U.S. Small Business Administration recently reported that lending to small firms by U.S. financial institutions stabilized in 2010, with a smaller drop than that seen in years past. The gross domestic product increased, the administration reported, and commercial and industrial lending may grow as the recovery continues. Capital One conducted a poll among small business owners and found many are more optimistic about the strength of the economy and their own financial positions. About 80 percent of those surveyed said they were not having cash flow issues, suggesting a balance between their own costs and the money coming in from clients.