The collection of delinquent accounts receivable can be a source of frustration to the small business owner.  These  preventative measures can help reduce the number of bad debts and increase the chances of collecting what you are owed: Credit Policy and Credit Application.  Every small business that is going to sell goods or services on credit should have a written policy describing the criteria that must be met to extend credit.  In connection with this, every customer or client can be required to complete a credit application.  The kind of information collected will vary according to your individual circumstances   A personal guarantee might be in order when dealing with a small business that has insufficient assets to pay claims.   The credit policy should take steps to protect the privacy rights of those about whom credit information is obtained. Written Agreements.  A written contract should be signed by the debtor every time goods or services are sold on credit.  The contract should provide that attorneys fees be awarded to the prevailing party in the event that legal action is taken to collect the debt. The agreement may provide for late charges and interest on past due accounts. Charging excessive rates of interest, as a practical matter, can actually be counter-productive to collecting debts, however. Documentation.  Adequate written records of goods and service sold on credit, payments, and interest charges should be created and maintained.  Such documentation is critical in the event it becomes necessary to prove the debt in court. Collection Policy.  The small business owner should adopt a consistent policy with respect to delinquent accounts.  The longer the account remains past due, the less likely it is that it will ever be paid.  The collection policy should determine when accounts are turned over to an attorney or agency for collection.  The policy should also incorporate the requirements of fair debt collection laws.  It is not unheard of for creditors to face civil or even criminal action for debt collection practices that go too far.