Here is Part 3 of the 5 Most Common Cash-Flow Mistakes that Small-Business Owners make…Being passive about past-due receivables

3. Being passive about past-due receivables

One of the fastest cash-flow killers — particularly for small B2B businesses — results from unpaid invoices from clients. If you aren’t being proactive about collecting payments from your clients, you could be on your way to a dangerous cash-flow situation.

Sadly, small businesses that don’t have solid late-payment penalties and collections policies in place are often taken advantage of. If your clients don’t know for sure that they’ll hear from you the moment a payment is late, you’re sure to be the last of their vendors to get paid.

If you haven’t already, set clear policies with your customers for penalties and consequences when payments are late. Good policies include a 5 percent late penalty after five days, and work stoppage after 30 days past due (for service-based companies).

Create an internal time line of procedures for when you’ll send the initial invoice, when payment reminders will go out and when you’ll make collections phone calls or cut off services if past invoices aren’t paid.

Some companies have even benefited from incentivizing customers through discounts for early payments.


This snippet is thanks to, and written by Jared Hecht