With the economy the way it is, we are seeing more than our fair share of collections work lately. So we thought that this would be a good time to offer some suggestions regarding collections for small businesses.

As you probably know, we prefer to avoid litigation. It's not that we are afraid of the court room. It's just that more often than not, litigation is bad business for small business. We don't encourage our clients to litigate "on principal," but only to pursue litigation when it makes good business sense.

With that in mind, here are some suggestions to avoid hassles with collecting for your work:

1. Get Payment Up Front. We do this ourselves. Most of the time, unless you are an exceptional client with whom we have a long-term relationship, we do not do the work first and ask for payment at the end. We ask our clients to pay before we do the work. If you collect up front, there is nothing to collect on the back end.

2. Get it in Writing. A written purchase order or services agreement will go a long way toward enforcing payment terms. Remember to specify how long a customer has to pay you, what forms of payment you accept, and what interest you will charge if payment is not received timely. We can help you draft payment terms if you are uncomfortable doing this on your own.

3. Accept Credit Cards. Accepting credit cards lets your customers pay for your goods or services over time, but you get paid right away. The small merchant processing fee you pay is worth every dime if you don't have to pursue the customer in collections later. Just be careful in choosing your credit card processing company. For example, we use Square for card-present transactions and PayPal for online payments because neither charges a monthly fee or withholds a reserve in case of chargebacks. The per-transaction fees are reasonable in light of not having to spend time on collections or fees.

4. Bill Immediately. Traditionally, businesses do batch billing every month. In that typical scenario, you gain efficiency in automating your billing process, but invoices may not go out for weeks after the work was performed or the product sold. As a result, your customer's cash flow may have changed or other bills may seem more urgent and your invoice gets back-burnered. Before you know it, you have 30-day, 60-day, 90-day or more past due accounts receivable. One way to avoid this is to stop batch billing. Bill your customers immediately when the work is complete or the goods are delivered. You will find that your invoices get paid more quickly.

5. Accept Short-Term Installments. We don't recommend this for every customer. If you have tried sending past due invoices and you are not getting a response, consider calling your customer and offering to break their balance into two to four monthly payments. Insist that they pay the first one right now, over the phone, as a sign of good faith. Then invoice them for the remaining monthly installments.

6. Ask for Progress Payments. If your services for a client will be performed over months instead of says or weeks, consider asking for progress payments to be made at the completion of certain stages of the work rather than as a lump sum at the end.

7. Work On Retainer. Where our services will be spread out over several months or years, we often agree to a monthly retainer arrangement with our clients. If the client fails to pay, we stop work. You can do the same. Just agree on a flat fee that is to be paid up front every month. Keep in mind that retainer clients can and should expect more for their money because you are guaranteed payment every month.

9. Don't Wait. If you have a customer with a past-due account, stop providing goods or services to them immediately. Once they have reached 30 days past due, send them a letter asking for payment. Follow that up with a phone call a week or so later. Then send a second, more stern letter at 60 days reminding them that you may refer the matter to collections and/or report their delinquency to a credit bureau if they fail to respond. Follow that up with a phone call too. At 90 days, refer the matter to collections and make sure that you or your collections agent report the delinquency to a credit bureau (if you do a significant amount of work on credit, it is worth joining a credit bureau reporting service such as Equifax, Experian or TransUnion). If nothing happens within 30 days, discuss collections litigation with your lawyer. Remember that there is a statutory limitation of time in which to file a collections lawsuit (in Florida, it's 4 years with an oral agreement and 5 years with a written agreement).