How often have you paid bills with the misguided confidence that your own accounts receivable were in the mail? For Thomas Callinan, president of Copifax, a $6-million Berlin, N.J., retailer of copiers and fax machines, once was more than enough.

"When we were smaller, we didn't have an adequate credit line, so we'd juggle payables and receivables down to the wire," he recalls. "Once, to avoid getting hit with a 1% late surcharge, we mailed out a check without the funds to cover it." Unexpectedly, "collections just dried up." To avoid bouncing the check, Callinan borrowed short-term funds from a minority investor.

"Now we wait until we've got the cash. I'd rather pay a week late, even with added interest, than risk a vital relationship."

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. . . Or to Receive?

When a buyer's check bounces back to you stamped "insufficient funds," don't write off either the customer or the invoice. "In most cases the other party wants to resolve the problem too, so you can collect your funds quickly and preserve your client relationship," notes Les Kirschbaum, president of Mid-Continent Agencies, a Rolling Meadows, Ill., collection agency. His recommendations:

Stage one: call the customer, explain the situation, and ask for a hand-delivered or express-mailed replacement check.

Stage two: if after two days you don't have a good check, insist on 24-hour payment -- in cash or by certified check or money order.

Stage three: without a resolution or an alternative payment plan, get tough -- you may need an outside specialist.

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