Six months ago I wrote a guest post for Robby Slaughter about the Code of Silence that exists among small business owners when it comes to talking about clients who don’t pay their bills.

At the time, I advocated that small business owners should be open to talking with each other about their clients. I genuinely wanted to protect my friends from people who were likely to take advantage of them.

I was recently aided  by two  competitors (and friends) who were honest and helpful with their advice regarding a client we shared. Their openness was much appreciated and helped me prepare for a sticky situations.

With their “heads up” I was able to manage and justify the amount of time I spent on this particular project. I spoke with my banker and my attorney just in case relations with the client became uncomfortable, as they unfortunately did.

I have learned several things from my experiences:

  1. Talk to your friendly competitors about your clients. They will tell you things you will may not learn from a credit check.
  2. Work like a construction company with progress payments. We actually started doing this a while ago and it has really helped our cash flow issues.
  3. Always have things in writing. We use TinderBox for almost all of our proposals. With standard terms spelled out for even small projects, there is a paper trail and less confusion about what has been agreed upon. I have learned that even with small projects it is vital not to skip this step.
  4. Talk to clients early if they miss payments. No one likes to make collection phone calls. They can be uncomfortable. While some clients legitimately hit a rough spot, others might be counting on your willingness to avoid confrontation. While you should be willing to work with the former, don’t be taken advantage of by the latter.

We have been lucky here at Roundpeg  I’ve had to do my share of chasing invoices and working with clients on creative payment plans, but I have only had to write off two invoices in ten years.  I have no doubt the number would be higher if I hadn’t chatted with my friends regarding some clients. My hope is that by taking my own advice on the front end, I will have less collection work on the back end.

What other suggestions would you add to my list?