It's impossible to overstate the importance of collecting money from customers in a timely and efficient manner. Having such a system will substantially reduce cash flow concerns that are critical to day-to-day operations, especially for small businesses.

If it's at all possible, have customers pre-pay for the coming month. It's the approach landlords have used with rental properties for years, and it's a common practice in several types of businesses. Car payments or gym membership fees, for instance, are typically within the first week of the month. Such a system reduces the possibility of a consumer getting a free month's worth of use from your product or service.

Even the most efficient system will encounter people who are overdue in making payment. For ease of collection, such accounts can be broken down into what are called "aging buckets", different categories that differentiate among current accounts, those that are 30 days past due, 60 days past due, and 90 or more days past due. The focus of an AR department should be on the most recent accounts for a couple of reasons: they will be the most numerous and the more emphasis that's put on them, the fewer accounts that will become seriously delinquent.

If your business offers financing terms to customers, be sure that due diligence is done on each customer. That can include a credit application or a check of their credit report. Either way, it's important you are aware of a consumer's payment habits before extending terms. As an incentive to qualifying customers, you can reward prompt payment, such as offering a 1% discount if invoices are paid within 10 days. It's a means of ensuring payment is received on time, the customer is happy since he gets a break, and ultimately, you save money because there is a cost associated with tracking late payments.

Make daily deposits of monies collected; let the funds you have worked to gain earn interest for you. In addition, it is a security risk to let large sums of money, even checks, accumulate in an office. If your business takes in a big volume of checks, ask your bank about using a lockbox. That's a mechanism through which funds will be credited to your account upon deposit instead of forcing you to wait through the several days required for a check to be processed.