This is the second part in a 5 part blog post series about dealing with late or non-paying customers.

If a client is having financial trouble and not paying you, you may want to offer him a more flexible payment schedule. While having to do this can be frustrating, it is a good way to recoup monies owed you without damaging the relationship. After all, the client may just be having a temporary setback.

But, before you offer to modify your payment terms, it’s critical to establish some parameters first:

1. Tell the customer you understand that every situation is different, and that you will take into consideration his ability to pay, his payment history, the length of time he has been a customer, and specific reasons why the account is past due in working out a payment solution with him.
2. Stress that modifying payment agreements cannot be done all the time; you’re doing it now because there is a problem and you want to help him resolve it. You can avoid this by putting every agreement in writing—with both a start and an end date.
3. Some companies implement rules about flexible payment plans to further protect themselves. Not entering into payment plans with a particular customer more than once every two, three or five years is one possible approach. You can also require 15 percent deposit for all new payment plans.

Understandably, you may not be thrilled about having to implement a flexible payment schedule. But, if a client owes you money, the likelihood is that he owes others as well. Financially strapped customers often decide which monthly bills will be paid first based on what they feel is easiest or most important to them. Debtees who offer a manageable solution will typically be paid first.

Before you offer to modify your payment terms, experts suggest doing the following:

1. Carefully review your customer’s payment history.
2. Have two or more options for payment arrangements in mind.
3. Put the new agreement in writing and be sure to have the customer sign it.

If these initial steps fail, you might need to use more aggressive means. Just be sure to use methods you’re comfortable with, since they’ll affect your future relationship with the client.

• Read Late or Non-Paying Customers Part 1 of this series to learn about dealing with late or non-paying customers.
• Read Late or Non-Paying Customers Part 3 of this series to learn about hiring a collection agency.
• Read Late or Non-Paying Customers Part 4 of this series to learn about covering cash shortages.
• Read Late or Non-Paying Customers Part 5 of this series to learn about firing a client.