Credit and collections for small business can be tricky, but a good plan for the way you extend credit to customers, how you monitor your receivables and how you recover money not paid to you is crucial. Here are some pitfalls to avoid in the coming year.

One size fits all credit – Allowing customers to pay on credit is a privilege you should extend in a thoughtful way. Not every customer should be granted credit arrangements. Know your customers and how they pay. Save your best credit terms for your best paying customers. Others should earn the privilege.

Lack of Documentation – Every phase of your credit process should be documented, from a customer credit application to customer contract. Even a simple email confirming basic details is better than nothing. Remember though, that a customer contract must be bilateral, meaning that both parties must agree to it. Be sure to get a signature or an email confirming their agreement to contractual details.

Late or inaccurate billing – So many collection issues arise from bills that are either incorrect or are sent far too late. Invest some time for quality control before your invoices are sent to customers. Bill promptly.

No in-house collections procedure. You should always be on top of your 30/60/90 aging. Have a plan to contact delinquent customers by phone and by letter.

Waiting too long to outsource collections – After 90 days, if your customer is ignoring you, you need to bring in the experts. You cannot do it all, and when you hire a collection agency, you free up some time to focus on other aspects of your business. Waiting too long will cost you, and not only with a higher collection fee.

It does not take a good deal of time to improve your credit and collections efforts. It only takes commitment to a process.