Cash flow is the lifeblood of any business. If your business relies on regular payments from clients, however, delays can be aggravating, or even threaten to close your business.

In an ideal world, you'd simply be able to sever ties with clients after several subsequent late payments. Unfortunately, many small businesses are still struggling to build reputations within their respective industries, which means they need every client they have, late payments or not.

If you depend on regular payments from those who purchase goods or services from your small business, there are a few things you can do to ensure you're paid on time. 

1. Set a Policy

Ideally, implement a policy that you require full payment upfront, and don't begin the work until the payment is received. This is a scary step to take for many business owners, because they fear that they'll lose business from potential clients who might be averse to this policy. In my own experience, it rarely deters clients--and when it does, it deters the kinds of clients who I don't want to deal with anyway. In the end, it minimizes headaches, reduces stress, eliminates money-chasing, and establishes an expectation of trust.

If you aren't ready to implement such a policy, then take the next step. When you initiate any new contract with a client, outline clear policies about late payments, and require a signed contract acknowledging these policies. If you're providing a service, it's customary to set milestones and deliverables from the beginning, especially on large projects. These milestones should outline what will be delivered by you, the provider, along with the payment amount that will be due at the time of that delivery. Your wording should also stress that if payment isn't received within a certain number of days, the contract will terminate. This will keep you from investing months or years into a project, only to never see payment.

For short-term projects, it's still OK to require partial payment as a deposit before work begins. Many tradespeople and professional service providers ask for a 50 percent deposit at the time contracts are signed as a good-faith payment. Even with this in place, however, the final half may be late in coming once work is complete, leaving a business to decide whether to continue with the next project the client is requesting or wait until payment on the last project has been submitted.

Your policy should outline how late payments will be handled, including service charges at set intervals. Each state has its own regulations, but in general this is charged as a percentage of the total due. Some businesses have found taking a more positive approach to this is more effective, though. Offer a ten-percent discount to any client who pays his invoice early or on time and you may be surprised how many debtors take you up on it. If you do opt to take a late-fee approach, be sure to look at it as more of a deterrent to late payments than a money-generating tool for your business.

2. Automate

There are many invoicing apps available; some are even free. Automated invoicing ensures you never miss billing someone for the work you do, among myriad other benefits.

To make things easy, choose an invoicing solution that allows one-click payment. If your clients receive an invoice with a link they can click to pay using a stored credit card or PayPal account, you'll be much more likely to receive payment without delay.

For recurring clients, I use and highly recommend Paypal, which is known and trusted by just about everyone. Clients agree to automatic recurring billing, and Paypal takes care of the rest. Each month, it charges their credit card and deposits the funds to your Paypal account, with a simple e-mail notification that the charge was successful.

3. End the Relationship

As I mentioned in How to Reduce Stress as an Entrepreneur, stress can take a serious toll on business owners. In some cases, you'll realize that one or two clients are the source of the vast majority of your stress.

Many articles that ask the question, "When is it time to fire a client?" list non-payment as a primary reason. As valuable as that client's money is to your business, if months have passed with no payment, that money is obviously not helping at all. Even if payment eventually comes in, the time and mental overhead you spend each month tracking payments, sending notices, and worrying that the client won't pay aren't worth it. In this case, the best thing you can do is put the late-paying client on notice that you'll be ending your working relationship at the end of its current term.

Unfortunately, ending a relationship with a client is one of the hardest parts of being an entrepreneur, even if that client's late payments have caused you unnecessary headaches. Many entrepreneurs feel loyal and grateful to their clients, or are concerned about their professional reputation. But you can still graciously bow out while still being firm, especially if you've mentioned the problem with late payments to the client previously. Try first discussing the problem politely with the client and, if it still doesn't get better, carefully plan the conversation before making the call.

If you can end things professionally and amicably with the client, that's ideal. Unfortunately, there will be cases where your client won't take it well despite your best efforts. As long as you've conducted yourself as professionally as possible, you shouldn't have any regrets. As time goes on, you'll likely have a few relationships with clients that don't work out, but the stress relief will be totally worth it.