BY DEAN KAPLAN For small business owners, cash flow is their life blood. Even though the recession has eased, credit can still be hard to come by, and profits may not be consistent. To top it all off, clients are taking longer than ever to pay their bills. It’s a recipe for a cash flow disaster. So how does a small business prevent a stack of late invoices in the first place? Do your due diligence. Credit reports used to be expensive for small businesses, but not anymore. Keep an eye on customers, especially those with large accounts, who could severely hamper your cash flow with a late payment or two. If you see a red flag on a major client’s credit report, consider making them a cash-only client. Set your terms firmly, but with a smile. From the beginning, make the terms of your payment requirements clear – politely, but crystal-clear. Too often, small business owners gloss over payment terms when signing a new contract or beginning a new project. While other issues tend to take priority in the beginning, you will be very glad you made payment arrangements a priority, too. Stay on top of your paperwork. Unfortunately, some clients do not need much of an excuse to delay payment. Make sure your invoice is perfect and that you have filled out all the necessary forms, just to be sure not one piece of information is missing. One common oversight is the purchase order number. Not having this number can cause invoices to float around aimlessly, and it is unlikely that accounts payable will call to tell you. Realize when it is time to lose a client. At what point do you decide to cut ties with customers who continue to fall behind? This point will be different for everyone, but you need to know where it is for your company. Consider whether the customer is a first-time offender or is staying in communication and making an effort to pay. These issues may factor into your decision, but ultimately, a customer who is not paying is not really a customer – he or she is a problem. Request payment electronically. Don’t rely on the post office to deliver payment – too often, business owners hear the old “check is in the mail” excuse. Instead, push for electronic transfer or direct deposit so you can get paid exactly on the 30th or 45th day, etc. Banks also offer services that allow checks to be faxed and scanned, with the money deposited into your account the same day. If all else fails, consider accepting credit cards or PayPal. Sure, there is a fee, but you’ll get your cash almost instantly. Offer a discount. You may not like the idea of rewarding clients for not paying, but in certain cases, this tactic may help you retrieve outstanding bills faster. For example, you could extend a discount on the condition that the debt be paid immediately in cash or a cashier’s check to entice tardy customers to pay up. It’s better to have something than nothing, but be wary of entering into a credit relationship with these customers in the future. Since cash flow is vital to small businesses, it’s important to prepare for, and address, slow payment.