Address late payments before problems arise.

THERE are limes when customers fail to pay their balance due and do not respond to calls or request for payments. Or what at first seemed like simply a late check could signal that an account is about to turn into a problem. Situations like these are tricky, especially in the case of major clients. Phil Adamson, consultant for Transworld Systems Inc., a collections agency, said there are a few essential steps that small businesses should rake.

"Recognize that your receivables are your biggest assets. Small business owners say they want more sales, but they fail to realize that they have huge amounts in uncollected receivables.

"You can look at your business for the first month and about 80 percent of clients may pay. If in the second and third months your payments fall drastically to around 5 percent or so, then you know that what you are doing is clearly not working.

"Two things are most important. One is to make sure that you have the regular billing and payment schedule in hand to see when the money was due and how late the payment is. The second thing may be trivial, but you should also make sure you have the current address of the client. If you call them up, you may discover that they may be thinking of going into bankruptcy or could be moving. Keep up with their address, so that even if they are moving, you still know how you can get in touch with them.

"About 60 days alter the bill is due, the business owner should call the client and reasonably tell them that they could go to collections if the client does not pay up. The catch here is that if you say you will go to collections and do not follow through, then the client can actually sue you.

"In such cases, one could use a third-party collection agency, because these people know the law and are trained to talk to the client over a period of time and effect a payment.

"There are a series of demands for payment you can send out to the client. "Small claims court is also an option. People always need some additional jogging before they pay their dues.

"I also highly recommend that small businesses get in touch with the client even after a late payment or collection and tell them that they want a continued relationship. For small businesses it is critical to keep clients because one big account may mean a lot more to them than to bigger corporations."

Case Study is a new feature in which experts offer advice on the various challenges that small-business owners often encounter. If you face an issue or challenge you think applies to others as well, please contact the Business Journal at [e-mail].