In a perfect world, every one of your customers are paying their bills on time and in full. If this describes your business, consider yourself one of the lucky ones. Chasing after customers who refuse to pay for your services can be time consuming and frustrating.

So how can you ensure that your customers will pay? Here are some tips that can help:

Keep up to date records

You should begin this exercise by taking stock of where you stand today. Get to know your customers history of payment by looking over your accounting records. Pay attention to which accounts are in good standing, and which require work to collect on.

In these records you may also want to keep notes on which methods of collection work best on these customers. For example, does one customer need a reminder e-mail that their invoice is due, while another responds better to a phone call?

These records may also make you aware of possible warning signs of a bad customer. Delays in simple information updates, sudden changes in order sizes, or inquires from other businesses who have outstanding accounts with this customer could all point to a potentially errant situation.

Being familiar with your accounts can also help you to keep them as low as possible. It is important to keep a balance between the work you are producing and the money you are collecting for it. Otherwise, you could find yourself being overwhelmed by your own debts and expenses and no income to cover those costs.

Learn standard practices

Okay, so you've looked over the books and realized that you've got some accounts that need attention. Before you begin chasing after them for your money, you should try and find out what other businesses in your industry are doing.

Learning what is standard practice will help you to establish collection guidelines that are inline with your colleagues and competitors. With a reasonable collections policy you can ensure that your customers won't come to you because you're so lenient, or leave because you have too many restrictions.

You can find this information from local and national trade associations, financial advisors, business colleagues, and reading the policies outlined in your competitors advertising.

Create a credit policy

Knowing the standard practice for your industry now allows you to create your own policy for collection. This policy doesn't have to be steeped in bureaucracy; you can keep it as simple or complex as you like. At the very least you will want to include basic information such as deadlines for payment, accepted methods, returns, penalties for late payment or refusal, and contact information.

Once you have created a policy, you need to communicate it to your staff and customers. Make sure that it is clear, understandable, and readily available.

Having a collection policy will hopefully go a long way towards helping you collect outstanding debts. However, there may be times that you are willing to bend your rules a little if it means keeping a good customer. For example, you may wish to extend a grace period to a customer who makes a one-time late payment, in an effort to maintain a good business relationship.

Learn a new clients habits

Now that you've gotten your books in order and created a policy, you need to maintain this behaviour with each new client that you take on. If you haven't done so previously, you may want to start asking for a credit report, or references from past suppliers. A bad payment track record could be one of the reasons a customer is leaving your competitor for you.

Keep an eye out for the warning signs that you've got a potential bad customer on your hands. A negative credit report, a sudden inability to contact them, they ask for more time without a viable reason, or they claim to be dissatisfied.

Develop an action plan

Regardless of all your planning and cautious investigation, you will likely find that there are times when customers still refuse to pay. Like your collection policy, you should develop a plan for dealing with these situations.

Perhaps this time-line may work for you:

Two weeks – At this point, it may be possible that your invoice got lost in a shuffle of papers or simply forgotten. You should begin the process by calling the customer and making a polite inquiry about the account. Discuss how soon the payment can be expected and make sure that both parties understand what is expected.

Four weeks – Despite your previous communication payment still hasn't arrived and you haven't heard from your customer to explain why. At this time you need to make a firm demand for your money. State a particular date that you expect the account to be satisfied and if it is not received explain that you will be seeking legal action either through small claims or a collection agency.

Eight weeks – By this point your repeated attempts to collect have all failed and it is time to seek outside help. You can file the case in small claims court, or approach a collection agency to take on the account. Each of these actions will mean that you have to take on additional costs. You will need to weigh these costs against the outstanding account. Ask yourself if the money owed to you is enough to cover these costs and still mean a profit for you.