All businesses need to turn unpaid invoices into payments to earn enough for paying bills and employees. However, small businesses, especially those run by business owners with limited credit options, are hit the hardest when they don’t get paid on time.

Using the right debt recovery techniques helps keep your business’ cash flow steady and limits how much you end up spending to collect your money. Taking steps early, rather than waiting months to try to track down a payment, is key no matter which methods you choose to use.

Send Warnings Early
Waiting until a payment is six months or a year late leaves you with a serious gap in your accounting books and makes it less likely that your client, purchaser or supplier will resolve the issue. Begin a practice of sending out neutral late payment warnings as soon as the due date on the invoice passes recommends Darrell Zahorsky at About.com. This allows clients who have simply forgotten about their debt to pay without penalty and doesn’t ruin your relationship, encouraging further business. It also gives you concrete proof that you made a fair attempt to collect on the bill before taking any legal action, which is required in many states. Read more

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