Use a detailed and comprehensive credit application for all customers.
If your business is extending credit to the customer (including providing products or services without receiving payment in advance) make sure you ask the right questions first. Make sure that your credit application requests detailed information about the potential customer as well as personal contact information for the owner(s) of any business applicant, their home address, social security number, date of birth, and credit references that include contact information. If the customer is a corporation, limited liability company, partnership or other form of business entity, ask for the names and contact information for all owners and officers. Make sure you are clear who the customer is in your application: is it the individual or is it a company? If it is a business, ensure that you know whether it is a sole proprietorship, corporation, limited liability company, partnership or some other form of business entity.
Obtain personal guarantees.
When possible, obtain a personal guaranty from the owner or owners of the customer. This will ensure that, in the event the customer's business fails, you have the ability to attempt to collect the debt from the owner. This also provides additional leverage if you have a customer who is delinquent on their account. Understandably, business owners who have personally guaranteed debt, are more motivated to have their companies pay.
Use forbearance agreements
A forbearance agreement is an agreement where the creditor and debtor agree that collection activities will cease, so long as the debtor meets certain payment obligations. Often it may be to your advantage to grant the debtor some additional time to pay off the obligation, in return for a specific payment plan and agreed on liquidation remedies. Written forbearance agreements can be useful to clear up any issues regarding the debt owed, including documenting the basis for the obligation if the contract is not clear.