You’ve committed the cardinal sin of owning a business: Poor cash flow management. In this challenging economic environment, your debt-saddled customers are taking their sweet time paying their bills—when they pay at all—which translates into you falling behind on paying yours. You’re over-leveraged. There’s no more wiggle room.

Ignoring the problem and simply withholding payment can lead to a barrage of nasty phone calls and letters from a collection agency, since businesses aren’t protected from threats and harassment under the federal Fair Debt Collection Practices Act. Not to mention the seven-year ding to your credit report.

To avoid all of the above, get ahead of the problem and actively negotiate with your creditors to preserve vendor relationships and, ultimately, your business.

1. Confront the numbers

Calculate your total business debt amount and analyze the bills to determine how much you can realistically pay. Make a list of your creditors by order of importance. Start calling. Settling debt is often not an option with secured debt, which is associated with a tangible piece of equipment or property that can be repossessed. By contrast, there is nothing attached to unsecured debt except a borrower's promise to repay.

2. Limit the players involved

A tete-a-tete only has room for two. Adding a debt settlement firm to the mix tacks on hefty fees while distancing your business from the supplier(s) owed payment. Direct communication is vital, especially if you want these people to work with you in the future. You want to make sure you're in constant communication to let the vendor know you are aware of the situation, and you're actively working on resolving it. Sometimes that is enough to delay turning your account over.

3. Make a reasonable offer

Timing is key. A vendor or creditor is unlikely to accept a reduced payment if an account does not yet appear as delinquent. Accounts in arrears for 90 to 120 days, however, can be turned over to collections. If paying in full is not achievable, request a “workout,” under which both parties agree to a reduced debt amount. Most vendors prefer lump sum payments. Some may be willing to agree to a lesser amount (as much as a 30 percent to 60 percent reduction off the original debt) repaid over a period of several months, particularly if they think the business is on the verge of declaring bankruptcy. Consider providing a promissory note, personal guaranty or collateral such as a lien against equipment. Explain your situation honestly—in person, rather than a quick e-mail. Give specific dates on when you will make payments and honor them.

4. Create a paper trail

Always request documentation of the debt in question to verify that it belongs to the business. Keep careful notes of conversations with any vendor representatives. Finally, once you reach an agreement and before making payment, request a written copy of the terms, including a statement that the payment(s) will completely fulfill the debt. If that is not feasible, record the conversation if you are in a state that only requires one party (you) to be aware of the recording.

By taking a proactive approach and communicating with vendors openly and honestly, you stack the odds in your favor for resolving the debt and engendering vendor loyalty.

Margie Fishman has worked as a professional journalist for a dozen years, contributing to National Geographic, Newsday, ConsumerSearch.com and many other media outlets. In her down time, she enjoys bargain-hunting, dancing, pretending to be a fly on the wall, and playing with her hound dog, Ernie Pyle.