October 17 is fast approaching when new bankruptcy laws go into effect. What effect will this have on the small business owner? Probably a bigger effect than before. My husband and I are small business owners. In previous years, we have always had clients who paid on time. This is the first year that we have seen how the economy really affects people.

Small business owners have to worry about whether their customers will pay. How do you know if your customers are going to pay? If you are a new small business owner or have been around for a couple of years, this is still an issue that comes up. Here are a couple of suggestions that should help with the foundation of your business:

1) Initially, when you meet with a client, you declare payment arrangements in advance. This could be if you are paid cash on delivery, upon completion of a job, or within a certain period of time.

2) Once you’ve completed the first job or two, see how the customer pays.

a) Did they pay on time?

b) Did you have to send them a reminder invoice stating that they were past due?

c) Did you have to call repeatedly three or four times? So when you received the check, was it returned due to insufficient funds?

d) Did the client honor the insufficient funds check?

This may happen to you. The idea is to get customers who pay on time and even in advance. If you have a customer that you have to remind yourself of from time to time, that’s acceptable as long as they pay. However, if you have a late paying customer and the check is no good, you need to be careful.

The latter type of customer is not a customer who wants to keep or receive more. Why? In our situation, the client came to us a second time with a crucial job and really needed help. The first check they gave us was honored. We completed a job for them and they assured us that they would pay us. Then when it was time to charge, the customer’s phone number was disconnected. We did some research and then found out that this particular client was being sued by the management of the building where he had his office. We eventually found out that they had filed for bankruptcy.

Looking back at the situation, we knew the first time we had trouble getting paid that we shouldn’t continue to work with them. However, the second time we tried to be nice and help them get out of a situation. Now, we run out of money to do that client’s job.

As a small business owner, you cannot afford to have many or no clients like this last one talked about, they will send your business out of business. Take the time to get to know and understand your customers. If you have to ask for references from other providers they have used, please do so by all means. Another alternative for a new customer is to pay cash on delivery until they have established a payment history for their invoices. You won’t have to do this for every new customer. However, if you think there is going to be a problem based on the conversations you have with the customer, you may want to institute such a policy.

Your small business could very well be your livelihood, and you can’t afford not to get paid. It is important to establish your policy in advance in terms of payment. Don’t let this be something you think is understood without verbalizing it. If a business ends up having too many clients who file for bankruptcy and don’t pay what is owed, that business could also end up bankrupt.

Leave a comment

Your email address will not be published. Required fields are marked *