Be picky about extending credit

Depending upon your business, chances are you have to extend credit to customers. Which means you have to send out invoices to get paid, then rely upon customers to pay in a timely way.

Make sure your credit customers understand that your terms are net 30 days. Then stay on top of your accounts receivable, sending out statements and other reminders so the customers don’t stall with their payments. Studies have shown the longer you allow a customer to avoid paying a bill, the less likely it is that he or she will ever pay you at all.

You don’t have to extend credit to everybody. Remember that it can cost you big time having a customer who’s a deadbeat. Deadbeat customers strangle your cash flow, and can ultimately sink your business.

If you do find yourself with a customer who doesn’t pay, negotiate to get what you can. Tell him you’ll settle the debt for a discount, provided you get the money right now. Yes, you may take a loss on the deal, but it’s still better than suing, which always costs more than you think.

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