We all want customers, and we generally want lots of them. In our haste to build up a customer base, our credit control can often go out the window. I have owned several businesses that have nearly been sent broke because people wouldn't pay their accounts. I don't blame them, I blame myself for not being tougher about giving them credit in the first place.

At the end of the day, if we don't get paid, we can't pay others. It's the classic vicious cycle that is very common in business. If you run a business where people pay you on the spot, you are one of the lucky ones. If you run a business in an industry that generally works on invoices and accounts, you need to be very careful.

Of course the majority of businesses are excellent at paying their accounts but they are not the ones to worry about. It's the others who are slow, or perhaps not trading very well, who are the concern and if you are not careful they could send you broke.

The point of this article is to be careful about giving out credit in an attempt to win the business. Sometimes we can be a little desperate to win a new client and we tend to gloss over things like payment terms, credit arrangements, taking a "whatever works for you" approach. This is neither professional or a good way to safeguard the money you will ultimately be owed.

If you give credit it's always smart to have a system in place to check the applicant to make sure that they are good at paying their bills. Even the smallest business can have a credit check system in place. A simple form asking for several trade references is really all you need. Many companies now ask for a director of the company to sign a guarantee.

Whenever I'm approached by a new client and they want an account, I ask for several trade references, which I get thoroughly checked. We also ask other business associates if they know of the client and if they know much about them. If they check out, I will extend credit. If they don't check out, I ask for payment up-front. I generally ask for a 50 per cent deposit from all new clients as a matter of course to ensure that costs are covered.

Another important issue with extending credit is to ensure that your payment terms are clearly explained. If you are issuing a 30-day account, spell this out. If it's a seven-day account, make sure that the customer knows and acknowledges the fact. They may not be able to work to such a short payment time (often the case with large companies), so you will need to make another arrangement.

Frank, open discussions about money and payment terms in the early stages of a business relationship will avoid problems in the future. And it makes your business look much more professional.

Another important point is that a company may be trading well when you start working together; they pay their bills on time and everything is fine. Then they start slowing down and 30 days turns into 60 days, and 60 into 90. Be aware that this is a warning signal that there may be a problem and you need to communicate with them to ensure that your money is safe. Don't be afraid to cut off credit if they can't give you an adequate explanation for why they their payments have slowed down.

Some businesses, when they have their credit cut, change their suppliers. A good tip that has saved me in the past is to be weary of new customers out of the blue, especially if you know that they have been using a competitor for some time. Even though our ego might say, "of course they would want to work with us", but they might also be using you because they can't get credit anywhere else.