In a perfect world, checks would arrive on time and for the right amount. A customer might even write "thank you" in the memo section.

Unfortunately, practical reality sets in and even the most careful businessperson will need to deal with late payments and deadbeats. (There is a school of thought that says, if you do not occasionally have trouble collecting, you are being overly cautious with the credit you extend.)

The first step in on-time collection is to do everything possible to ensure prompt payment. Once an account becomes seriously delinquent, there is another series of steps to take.

As you develop your credit policy, aim for one that ensures as much cash for your business as quickly as possible. You will, of course, be bound to practices within your industry and the characteristics of your customer base.

TIP: Make your credit terms clear from the beginning, whether your customers are consumers or other businesses. Whenever possible, use a contract or letter agreement to specify terms including when payments will be due.

Credit terms may call for a down payment, the remainder payable in 30 days; final payment on delivery; or a discount for early payment.

How can I check when I get bad feeling about a customer?

If you have any doubts, get a credit check. For retail transactions, check with one of the three consumer credit bureaus. Dun and Bradstreet would be a way to investigate business customers.

How can I make sure I will get paid if my customer owes money to a lot of companies?

Become a secured creditor. As creditors line up to collect from a company, a secured creditor has a stronger claim than an unsecured creditor. This status must be obtained in advance by filing the appropriate documents to restrain the customer from disposing of equipment they may have purchased from you.

What else can I do to ensure prompt payment?

If the type of your business warrants it, you may decide to accept credit cards. For this, you will go to a bank and get a merchant account. The bank will charge a fee that ranges from 2.5 to 5.5 percent of sales.

TIP: Send bills promptly. If invoices arrive weeks after your customer expects them, they may wonder if you are serious about collections. In fact, there is no rule that says you have to wait until the end of the month. If you have just finished a major project, why not get the invoice off while the work is still fresh in your customer's mind?

What can I do about overdue accounts?

Here are some steps you can take to collect once you have concluded that your debtor is stalling. They are listed in order of increasing severity.

1. Diligently monitor past-due accounts

Good bookkeeping and preparation will pay off as you will not be surprised by an account that is 60 days late in paying. "Forewarned is forearmed," they say, and you will have time to plan your next steps.

2. Contact your debtor regularly

Once you are sure that you need to step up your collection efforts, begin with a series of phone calls and letters. The letters should be increasingly aggressive, although neither calls nor letters should step out of the boundaries of courtesy.

3. Maintain contact records

Prepare for possible legal steps by keeping notes of details of conversations you have held with your debtor, alternatives you have discussed, dates of invoices sent and any other communications with the debtor.

4. Negotiate

Be ready to compromise. You may save time and energy by taking less than 100 percent on the dollar from a creditor.

5. Collection agency

A collection agency will take a share of the amount received from your debtor, but it will free you up to pursue the growth of your business. For larger companies, a law called the Fair Debt Collection Practices Act regulates how agencies can contact debtors and ensures fair practices. It would be good to check with your collection agency to make sure their practices fall within the guidelines.

What about trying to make sure my customer does not sell the equipment I sold him or her?

You can put a lien on the equipment. A lien gives a creditor the right to take another's property if an obligation is not discharged. A mechanic's lien secures payment for work and materials in erecting or repairing a building or other structure. Liens can impact the day-to-day operations of your creditor and have potential to be quite effective.

If I go to court and win, how do I collect?

You can go to court to collect your debt. If the court rules in your favor, the judgment can be enforced through a local sheriff who may take the property or record a lien against the property. A sheriff can also arrange for the property to be sold.

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