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10 Ways to Improve Collections and Cash Flow
by Daniel Kehrer
May 27, 2023
Young woman at register of store taking customer's credit card

Collecting money from customers can be a challenge for many small businesses. But sometimes business owners themselves are the culprits. Many have poor invoicing and collection procedures that create easily avoidable problems.

Here are 10 ways to keep the cash flowing. Some apply to any type of business while others are best for B2C or B2B: 

  1. Create better invoices: Many businesses hurt themselves by sending poorly done invoices. Bills and invoices must be detailed, yet simple and clear. The invoice should itemize everything and be sent promptly. This reduces questions and confusion that cause customers to delay. Avoid cute designs and fancy colors that detract from the main business purpose of an invoice. Make it clear how checks should be made out, where they should be sent, the due date (or simply “On Receipt”), and any instructions for paying online, by credit, debit card, PayPal, or another method.
  2. Use a cloud-based billing or invoicing service: Online invoicing and billing services designed for small businesses, self-employed professionals and freelancers are a great solution. For example, offers a popular online invoicing tool that lets you simplify and speed up your accounts receivable process. You can easily create, send and track invoices. Customers can view and pay your invoices online, and the cash goes straight into your bank account. offers similar services.
  3. Offer early payment and pre-payment discounts: When you rent a car or reserve lodging, many car rental companies and hotels offer two prices: A discounted price if you pay in full now; and a higher “pay later” price. Why not try something similar? Consider offering a discount of, say, 2%-5% for paying in advance. This rewards customers, gets you the cash quicker, and saves you the time and effort of trying to collect later.
  4. Set a penalty for late payment: First, you’ll need to establish a clear and consistent policy explaining that late payments can trigger a fee. Even if you don’t actually charge the fee or end up waiving it for loyal customers who are late for good reasons, just mentioning it on your invoices will spur prompter payments.  
  5. Require deposits, down payments, and/or progress payments: While this is a standard operating procedure in some industries and professions, many types of small businesses can employ the same tactic. Don’t be afraid to ask for a portion of your payment upfront and additional payments along the way as results are delivered. 
  6. Take a personal approach to overdue payments: When payment is slow in coming, follow up personally and courteously. Asking a clerk, bookkeeper, or someone else to make these contacts is more apt to fail. Providing personal attention may also provide you with valuable intelligence on why the payment is late – including customer service or product problems.
  7. Check customer credit: More and more small businesses are checking customer credit ratings, including businesses as well as consumers. Credit rating firms such as Experian, Transunion, and D&B offer a variety of low-cost ways that small businesses can do this.
  8. Set reminders and safeguards:  Effective billing and collections include a step-by-step schedule for initial invoicing and follow-ups. This should include a rule on sending invoices immediately and following up with letters, emails, or phone calls if payment is not received in the specified time frame. Your invoicing process should also include safeguards so the right invoice goes to the right customer – always. Use an invoice numbering system and make sure you don’t repeat a number. This can cause all kinds of confusion and delays.
  9. Develop some backup: If possible, at least two people should be able to handle invoicing and collection duties for your business. That way, if someone is on vacation or quits, invoicing won’t grind to a halt. 
  10. Get help: Using a professional service to help manage receivables is something to consider before accounts become a serious collections problem. D&B (, for example, offers a debt collection service specifically designed for small and mid-sized businesses, called D&B Collect. And don't forget to talk with a SCORE mentor


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About the author
Daniel Kehrer
Daniel Kehrer, Founder & Managing Director of BizBest Media Corp., is a nationally-known, award-winning expert on small and local business, start-ups, content marketing, entrepreneurship and social media, with an MBA from UCLA/Anderson. 
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