Finance for Small Businesses
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Any small business that hopes to prosper will have to keep a tight grip on its accounts receivable. The key to keeping a tight grip is to understand that the bill collection process really begins as soon as the sale is made.
Collecting overdue accounts can be an especially tough process for small businesses because debtors often believe they can put off payment to a small business longer than they would to a large company. And most people find asking or demanding payment a difficult task.
Reluctance to collect a debt often has psychological roots. Guilt about profiting off another, anxiety over a potential confrontation, and fear of damaging a business relationship are reasons why many people let bills slide. Often, creditors over-identify with tardy customers and help rationalize the late payments.
But it's essential that you not let the difficulty of the task distract you. Try applying these ideas when you're contemplating a sale of goods or services, thinking about extending a line of credit, or dealing with an overdue payment:
Never forget that the success of your business may depend upon how well you are able to collect overdue accounts. For more advice on how to keep overdue accounts from ruining your business, take a look at our discussion of credits and collections.