Devoted to Managers and those that seek to improve their management skills

I remember when I was managing a co-op business for the married owners. They had a lot of corporate accounts that they offered buying on credit to. The problem was that they were trying too hard to please them by letting them get away with paying their bills late all the time; when I say late, I'm talking weeks, and sometimes over a month. For a small business or division, this can kill your cash flow.

One of the partners began to realize that the business was starting to struggle as a result. So they simply started calling some of their corporate customers, telling them that they would need to start paying on time or they would have to suspend their buying privileges.

After a bit of nervousness before the first call, one of the owners commented: "you know, that wasn't as hard as I thought it would be." Let's face it, a customer that pays way late, isn't a good customer at all, and can cost you more than they're worth keeping.

The key in all of this is to make sure we all have access to short-term credit lines. For larger companies this isn't usually a problem, but for small businesses it has to be done a little differently.

For a small business, there isn't the luxury of predictable cash flows, so you need to have credit cards, home equity lines, and credit lined up with a bank, to cover those soft spots that will inevitably arise.

The other thing that should be done is to have your monthly projections lined up with reality. Don't be overly optimistic and basically tell yourself a lie. Tell a lie to yourself long enough and you'll begin to believe it.

These are two of the major mistakes that business owners make. The answers are pretty simple though: have some backup plans for cash flow, and make realistic projections of the business you'll do monthly. That should help cover you and protect you during the toughest times.

For a look at credit and collections for your business, my colleague, Michelle Dunn - at Know More Media - has an excellent blog covering all aspects of it.