Pay Me! How to get the money you're owned when no one seems to have any

One sure sign of a down economy is an uptick in collections war stories. For business owners, especially those at companies that rely on relatively small client bases, a couple of payments that stretch from a prompt net 30 to a sluggish net 45 can mean the difference between making payroll and facing an office full of angry employees.

These days, no company can count itself immune to late-payment syndrome, and with revenue down and reserves already being tapped, not all small businesses have the cash cushion necessary to survive a client who turns deadbeat. When phone calls go unreturned and checks come back marked NSF, it's easy--and understandable--to get angry. It may even be tempting to go Goodfellas on a client with delinquent debts: You're behind on bookkeeping because your mom is in the hospital? Pay me! A fire at your office building destroyed all your records? Pay me!

But you don't need to hire a couple of goons to collect the money you're owed. And you don't always need to enlist the help of a collections agency, either. Collections experts say that when properly managed, billing and collection strategies can help strengthen client relationships instead of reducing them to a trail of burned bridges. Here's how they recommend handling some familiar collections scenarios with clients who have already fallen behind on their payments.

The problem - The bill is already 25 days past due . . . and now your client asks for an installment payment plan.

Don't become your client's bank if you can avoid it, experts advise. Suggest alternate forms of payment: credit cards (business or personal) or other accounts to which the client may have access.

"If they've got an order for $500 or $1,000, and the owner won't put it on his credit card, you've got a problem," says Steve Wideman, executive vice president of debt-collection service Credit Control LLC. "You're not going to collect. If he won't put it on his own credit card, then you know he doesn't have the confidence that he's going to have money to pay for things."

If you do allow an installment arrangement, start asking your client what caused the delay, and listen closely to the answer for clues about his circumstances and their impact on you, says lawyer Steve Harms, co-author, with Aaron Larson, of Credit & Collections Kit for Dummies, coming out in September. "If there are serious problems, then I would probably set up an installment payment, with the first payment due today." Insisting on "today" is key, he says, because it's a test of whether the client is lying.

Wideman advocates a similar approach. "I can work with you," he says, "but I need to get the check when you tell me you're sending it. No more excuses."

The problem - The customer apologetically says personal problems are preventing him from keeping up with billing.

An elderly parent requires increasing care and supervision. A newborn is placed in the neonatal intensive care unit. We all have to contend with serious problems that can shift our focus away from running a company.

In this situation, don't fall back on the phrase "it's just business," Harms advises. Customer relationships generally hinge on some sense of personal connection, and it's important to acknowledge that, without allowing the relationship to override your own need to be paid. Harms advises that you remember the following: "Somehow I've got to get him to prioritize my bill even though he's got personal problems." To do that, he advises structuring a request for payment in a way that reflects concern for the client and cautions him against compounding his personal problems by creating credit and business problems. "You've got other priorities, and one of them is to keep your business intact. That's a very important priority, and you'll be falling back on that once your personal issues are resolved."

Alan Hauff, director of the University of Missouri-St. Louis Small Business & Technology Development Center, cautions small business owners against trying to impress their clients by acting as though a 30-day payment delay won't cause them any problems. They fear appearing desperate, when in fact, they're just seeking closure of the business transaction.

"One of the challenges that business owners have is that when we make the call, we hear all these excuses," he says. Learn to flip the conversation. "Bring it back to: 'We need this business relationship. You need it, I need it, we need it.'"

Whatever you do, don't try to use this ploy with Harms. "I can kind of turn that back on my friend a little bit," Harms says. "I'll say, 'Because we do have a friendship, let me tell you why paying your bills on time is your top priority. You do not want to have a reputation issue. You do not want to have a black mark on your credit. You do not want us to have a bad relationship where if you needed a rush order, I couldn't ship it to you unless you sent me a check by overnight mail. So since we are friends, let me tell you how important that really is.'"

You've got to be assertive, he adds. "And if the friendship falls off a bit, so be it. Your obligation is to your company."

The problem - The customer doesn't take your calls or respond to voice mails and e-mails.

In this situation, your immediate to-do list includes the following: