When customers pay late – or don’t pay at all – it can hurt your
cash flow. Here are some ways to prevent problems and deal with issues
when they do happen.

Tips for Preventing Customer Payment Problems

• Be wary of projects that were started by another contractor. It raises a red flag when a customer wishes to suddenly switch from one contractor to another. Make sure the “opportunity” didn’t come to you because the customer didn’t pay the other contractor and is looking to find the next unsuspecting business to do the work.
• Set up a payment schedule to insulate your business from non-payment. What works well for many contractors is asking for one-third of the project rate up front, another third at some point during the project, and then the final third at the end of the job. Getting payments in installments can help keep you on solid ground as you devote time, materials, and effort to a job.
• Don’t put all of your eggs in one basket. Contractors that rely on one or two customers for their income are at
  risk of needing to scramble to find work if the customer suddenly hits a slump or decides to use a different contractor. It also puts the price negotiation power in the hands of the customer. Try to diversify where your revenue comes from, but if you do put all of your eggs in one basket, watch that basket carefully!

Tips for Dealing With Delinquent Customers

• Be professional, calm, and politely persistent. Set a schedule for calling non-paying customers regularly to check on the status of their payment. Set expectations that you’ll be calling back again to check in.
• Propose a mutually agreeable payment plan. Often, slow payers are either poor managers or in a financial crunch. They want to pay, but they’re struggling.
• Consider a collections firm, but only after other tactics have failed. If the dollars at stake are significant enough, then it may be worth trying this. Realize, however, that this could do permanent damage to the customer-contractor relationship.