Today’s economic landscape has caused additional collection problems for many small businesses. Late receivables have become the norm rather than the exception. It’s companies’ using an age old trick that can help when they are tight on cash flow — collect what is due as quickly as you can and pay your bills as slowly as you can get away with. And if your business is one of the companies being paid slowly, that can put you at risk.
So what can you do about it? First off, if you have not received payment by the due date on your invoice, get on it right away. Don’t let it languish. The longer you wait to deal with the issue, the less likely you are to be paid.
To circumvent this problem, some companies advise their customers that interest will be due on late accounts. But that’s a slippery slope and what rate you can charge is dependent upon the state you are located in. I was unable to find a definitive guide that would help you out, but there is a good resource listed by state over at Carreon & Associates in their credit library. To be totally safe and ensure you are within the law, it would be a good idea to run your decision by an attorney before you move forward.
P.S. If you need cash flow help, sign up to get my FREE cash flow tips delivered directly to your email box. Just click here and fill out a simple form to get your free cash flow tips.
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I agree and the maximum you should really be allowing customers to pay is 15-30 days and no more. If they do go over time you need to get on this straight away and if necessary charge interest – keep that cash flow going as this is the life blood of your business.