Do This Yourself:

• Establish or enhance strong customer intake procedures, including establishing overall credit limits and payment terms, as well as regular internal monitoring of accounts, including A/R aging reports and other resources, such as Dun & Bradstreet.
• Accelerate billing cycles, if possible. Consider billing more frequently than once per month. If customers are “stretching” payment terms, get that clock running.
• Consider factoring (selling) your receivables or, alternatively, offer discounts for prompt payment.
• Consider receivables insurance for some part of your portfolio, such as from Euler Hermes or other providers.

Get From Your Customer:

• Obtain a standby letter of credit (L/C) to assure full or partial payment in the event of a default. Even if the customer files bankruptcy, the L/C can still be drawn.
• Obtain a guaranty from the business owner or other third party. Of course, in many closely-held businesses, the owner’s wealth is tied up in that same business.
• Require Cash in Advance (CIA) or Cash on Delivery (COD), that is, no credit provided.
• In addition to CIA or COD, require that customers with past due accounts pay extra for current shipment. For example, require two dollars in payments for every one dollar of goods or services delivered; however, note that this would be a textbook preferential transfer if the customer ultimately files bankruptcy.
• Under the Uniform Commercial Code, you can (a) require adequate assurance of performance, i.e. the ability to pay (and you can also suspend shipments in the meantime), and (b) submit a reclamation demand, identifying the goods you sold with specificity and requiring their return. Sometimes it is possible to stop the goods in transit before they reach the distressed customer’s facility, and become subject to the customer’s lender’s blanket security interest. 
• Obtain a Purchase Money Security Interest (PMSI) in inventory or equipment that you sell to the distressed customer. However, note that there are special rules for dealing with that customer’s current secured lender, and failure to abide by those rules will be fatal to the priority of the PMSI.

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