As a CFO, a major cause of cash flow problems that I see is that my clients are doing business with people that are slow paying or just don’t pay. Sometimes they do it because they know the customer personally or because they’ve known them forever.

Other times they do it because business is bad and they need to keep people working and they will do anything to get business.

Whatever the reason, it is just bad practice and will put you behind the eight ball quickly.

What you want to do is to establish a system of collecting accounts receivable so you get payments that are accurate and on time.

Here is an example of a strategy that if applied consistently and timely will lead to successful Accounts Receivable

Collections:

Assume an invoice with terms of net 30 days.

Between the 35th and 40th day contact the customer. If the customer is a customer you know pays within 30 to 40 days based on a history that you have with that customer then do not contact them until the 40th to 50th day.

If the customer does not return your call or you were not satisfied with the customer’s answer then send a 10-day Demand Letter, requiring payment within 10 days or the account will be put in collection.

If not paid by the 11th to 15th day then put the account in collection.

If you are having trouble with slow-paying customers, implement this strategy to make sure the money is consistent and timely.