It has often been said in economic circles that a rising tide lifts all boats. The same could be said of a falling tide (in this case, a severe recession in the absence of easy credit), which can maroon even the most ship-shape of operations, since businesses are more interdependent than they may realize in good times.
No method of account collections is fail safe and using the services of a collection agency should be the last option, but a variety of strategic moves can improve the chances of keeping the wind in your sails:
Do Your Homework Before Doing Business: This is cold comfort for those struggling to squeeze a dime out of currently delinquent customers but good practice for new ones. Forward-thinking accountants can check the credit rating of a business through Dun & Bradstreet (D&B) while also checking references.
Set More Favorable Credit Terms: Stacking the deck in your favor is smart practice. One strategy is to require credit card payments; that way, the payments are predictable (i.e. you're in control) unless the customer severs the relationship.
Explain Credit Terms Upfront:Customers who know (Jim Heath) that you'll charge late fees after X number of days and then send it to account collections after Y number of weeks will be more motivated to pay on time. And requiring payment within 15 days instead of 30, offering incentives for early payment, can ensure that you're at the top of the list for who gets paid first.
Use the "Velvet Hammer" Approach: Some business experts insist that treating customers as partners in your shared success (Suite 101) can go a long way toward putting your company's name at the top of the list when it comes time to write checks. Some even say that tacking on interest only hurts the relationship and may even backfire.
If you're still struggling to get paid using those methods, the next Free Enterprise entry provides some tips on how to get tough.