One of the reasons why starting your own business is so challenging is the fact that you have to deal with clients on a regular basis. This goes beyond discussing the final deliverables or meeting with them to discuss various aspects of their actual project.  Dealing with a client extends to accounting and billing issues. For most of us, this is outside of our area of expertise and can often times cross over into the uncomfortable which means that we’re more likely to avoid it than to take it head-on.

Why? Because asking someone for money and/or to pay their bill (on time) is always likely to increase tensions between both parties.  It usually leads to increased attention and additional focus on the minutia of the actual work you’re doing for the client.

Because this is such a common occurrence in small business and many companies are struggling to continue making their contractual obligations, I’ve got some tips to help ensure that your communications for billing are as smooth as possible.

Tip 1: Get Everything in Writing (on record)

The most important aspect of any business relationship is to have an agreement in place before you get started. At a minimum, your agreement should provide details on what is expected of both parties, the amount of remuneration for the work involved and what happens in case either party decides to default on the agreement.

Failure to get your client’s sign-off on a written statement of work is the surest way to get burned by a client.

Tip 2: Request a Down Payment

In order to get started on a new project, you should request a down payment large enough to ensure that you have funds to get the project started AND reach the next payment milestone without losing money in the process.

Tip 3: Keep a Detailed Worklog & Invoice Regularly

One surefire way to ensure you will not get paid by a client is to surprise them with a large bill after months of incremental work. The amount of your invoice can be so shocking and unexpected, that the client simply refuses to pay the full amount in any timely fashion. If you get stuck in this situation, try to initiate dialogue with the client about beginning a payment plan, with the objective to complete all payments within X amount of time. This strategy helps both parties amicably work out a solution – you get paid and they get the burden of a large invoice off their back.

What you should have done:

Had you sent them an invoice every two weeks for the work you were doing, the chances of you getting paid those smaller amounts would be greatly improved.

Tip 4: Pay Attention

If you start to see signs that the client may be wavering on their ability to support the project in any way (e.g. time commitment, financial issues, delivery of collateral), make sure you that you are cognizant of these events and strategize the remaining project accordingly. Keep your strategies within the constraints of your agreement of course – you still have to deliver your end of the bargain. Just don’t get too deep into costs and/or hourly charges that you stand to lose money if the client abruptly stops the project – try to stay on pace with the amount of funds the client has paid to-date.

No Sure Bet

There is no single tip or combination of tips that anyone could provide you to avoid getting burned by a client. Too many factors surround their decision to stop payments for you to control all of them. If you’re facing a situation where a client is not paying their bill, it is important that you take the necessary actions required to acquire payment.

For example, you could:

• Withdraw deliverables and/or ownership of final product until balance is paid.
• Enlist a collection company to solicit the remaining balance.
• Take the client to court.

In addition to the tips on processes and procedures to follow to help ensure you don’t get burned, I’d also encourage you to really take a hands-on approach to your billing and accounting – don’t ignore it. Especially for entrepreneurs, contractors, and new small businesses without an accounting firm on call to assist them.  Maintaining and following through on your company’s books should be a top priority.

About the Author

As a co-owner of a search marketing company and web development business in Arizona, Cory Howell is an avid user of legal contract software to generate his business agreements. Using these template agreements, he has markedly decreased the headaches and frustration associated with non-paying clients.