You sell the product or perform the service and send a bill, and the customer pays. End of story. Not always. While most customers will pay you promptly for your work, there will always be those who are slow or don’t pay at all. This can be more than an irritation; it can stifle your cash flow and cause problems for your business, especially if large amounts are involved. The best way to address a collections problem is to prevent it from happening. Make sure your clients understand and accept your payment policies before doing the work. If you provide a service, you may want to ask for partial payment up front, with the balance due upon completion. For large or long-term projects, you can make arrangements to be paid at regular intervals or as major milestones are achieved.

Make sure your payment terms are also spelled out on your invoices. Specify a payment deadline or period (e.g., 15 or 30 days after issuance), plus a penalty for late payments. Again, make sure your customers understand this policy ahead of time so that they can’t claim to be “surprised” by your requirements.

Ask where and to whom the invoice should be directed to help expedite the payment process. If it’s someone other than the client, get a name and contact information.

Let the customer know how you will send the invoice (email or post office) and confirm that method is acceptable. As an alternative, you could ask the customers for their invoicing preferences.

Your invoices should include your company name and contact information, and a summary of the work performed including itemized costs for time and/or materials. If you choose to use email, your invoice should be a separate attached document or include a click-thru to a payment site (such as PayPal).

Don’t let overdue invoices start to age. If the deadline passes with no payment, call the customer or contact person and politely ask about the status of your invoice. Many companies do wait until the last minute to issue payments, so the check could well be “in the mail.” Or, there may have been an accounting issue. Document each call and what happened, then follow up again.

If your payment still isn’t forthcoming, notify the customer that some action needs to be taken. Again, be polite and professional. If they are having financial difficulties, they may want to negotiate partial payments as their resources permit. That’s fine, as long as it doesn’t hurt your cash flow; but the late fee should still be included. If you see no hope of receiving payment, it may be time to contact an attorney or collections agency for assistance.

Susan Holmes is a SCORE volunteer mentor. To learn more about collections and other small business matters contact SCORE is a nonprofit whose volunteers provide free, confidential mentoring and training workshops to small business owners.