Managing accounts receivable, the payments your clients owe your company for sales or services rendered, is a critical component of your business. If you don’t get paid in a timely manner, then neither does the rent, your vendors, or your employees. However, despite the importance of accounts receivable management, many businesses find collecting bills for services rendered challenging. A recent survey indicates that over forty percent of businesses have customers who are over 90 days late on payments, and nearly half of all businesses in the survey indicated they had written off bad debt in the past year alone. It doesn’t have to be that way. Here are six ways you can improve your accounts receivable management practices today.

Set Terms of Payment

As a small company, especially a startup, set clear payment terms with all of your clients. Provide clear invoicing that the client can agree to before the service or sale is rendered, and ensure the customer knows exactly when the payment is due. As a matter of course, try to set a conservative billing period, and avoid 60 and 90 day billing terms that make it more challenging for you to account for your own bills due. Finally, consider requiring a down payment on services rendered for items such as construction projects, or batch production, to help offset your own costs during the billing period.

Establish Clear Credit Policies

If you decide to let a client use a line of credit, ensure that you have clear guidelines. The longer it takes you to recoup payment for sales or services, the more challenging it is to properly manage your cash flow. Make sure that your client understands the terms of credit, and signs an agreement to abide by them, before allowing them to purchase goods or services using that credit.

Maximize Payment Options

Strive to make it as easy as possible for your customer to pay your company for sales or services rendered. Wherever feasible, work to increase payment options – from cash, to credit card and check, to electronic funds transfer – so that your client can choose a preferred method and expeditiously pay the company. This will help to further reduce the amount of time between sales and payments tendered.

Do a Credit Check

Before your small business takes on a new client, especially for a long term or otherwise expensive project, consider checking that clients’ credit history first. If your client has a history of missed payments, collections, or otherwise poor credit, that client may not be worth the risk. A credit check should almost always be required for any client with whom you are extending a line of credit. Doing the credit check prior to signing a contract can help you avoid headaches with collecting payments due later down the road.

Outsource Your Accounts Receivable

If your small business’s accounting department consists of you, late at night, staring at your computer and trying to figure out a statement of cash flows spreadsheet, consider outsourcing your accounts receivable. Hiring a reputable accounting firm to manage the payments you are due can allow your company to focus instead on marketing, sales, and customer service. A trained accounted will have the expertise you may lack to manage receivables properly, and free up time for you to grow your business.

Collections as a Last Resort

If a client is past due on a payment, try to reach out to them personally to give them one last chance to obtain your payment. If that fails, consider as a last resort employing a collections agency. This will likely be a time-consuming route either way, so it is always a good idea to attempt to resolve late payments prior to sending the debt to collections.

William Lipovsky owns the personal finance website First Quarter Finance. His most embarrassing moment was telling a Microsoft executive, "I'll just Google it."

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