By Taffy Wagner
October 17th is fast approaching when the new bankruptcy laws
take place. What effect will this have on the small business
owner? Probably a more major effect than before. My husband
I both own small businesses. In the previous years, we have
always had clients that paid on time. This is the first year
that we have seen the economy really effect people.
Small business owners have to worry about whether their
customers are going to pay. How do you know if your customers
are going to pay? Whether you are a new small business owner
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 state up front
the payment arrangements. This could be whether you are paid
COD, upon completion of a job or within a certain amount of
2) Once you have completed the first job or two, see how the
a) Did they pay on time?
b) Did you have to send them a reminder invoice stating they
c) Did you have to repeatedly call three or four times? Then
when you got the check it was returned for non-sufficient
d) Did the client make good on the non-sufficient funds check?
This could possibly happen to you. The idea is to get clients
that pay on time and even ahead. If you have a client you have
to remind every now and then, that is acceptable as long as
they pay. However, if you have a client that pays you late and
the check is not good, you want to be wary.
This last type of client is not a client you want to keep or
get more of. 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 they made good on. We completed a job
for them and we were assured we would be paid. Then when it
time to get paid, the client’s phone number had been
disconnected. We did some research and later found out that
this particular client was being sued by the building
management where they had their office. In the end we found
that they had filed bankruptcy.
Looking back at the situation, we knew the first time when we
had problems getting paid that we should not continue to work
with them. However, the second time we were trying to be nice
and help them out of a situation. Now, we are out of the money
for doing that client’s job.
As a small business owner, you cannot afford to have many or
any clients like this last client talked about, they will send
your business into bankruptcy. Take the time to know and
understand your clients. If you have to ask for references
other vendors they have used, by all means do that. Another
alternative for a new client is to have them pay COD until
have established a history of paying their bills. You will not
have to do this with every new client. However, if you believe
there is going to be a problem based on conversations you have
with the client, you might want to institute such a policy.
Your small business might well be your livelihood and you
cannot afford not to be paid. It is important to establish
policy up front in terms of payment. Do not let this be
something you think is understood without verbalizing it. If
one company ends up having too many clients filing bankruptcy
on them and not paying what is owed, that company could
potentially end up in bankruptcy as well.
About The Author: Dr. Taffy Wagner is the author of Debt
Dilemma. Debt Dilemma is her own personal story of how she got
into debt and was able to get out without filing bankruptcy.
She will be launching a national marketing campaign on October
18, 2005. View her website at
www.paidoff.net/SpecialPromo.html for further details.