For consultants working to build a customer base, or others hoping to preserve long-standing relationships, trying to collect on unpaid monies while still working for your client can be a source of frustration. A challenging economic environment has resulted in cash flow crunches for many small and midsize businesses, which for IT consultants and other independents, can mean delays in invoice payments, and even partial or nonpayments. The situation appears widespread among U.S. small businesses; a 2002 Dun & Bradstreet survey found an increased number—25 percent—would place more emphasis on collecting unpaid debts this year than last year.

Consider the following steps to keep your client happy and receive payments while avoiding collection agencies, lawyers, and small claims court.

Develop a payment strategy
Be aware of other freelancers’ and employees’ moods, suggests JR Evinger, CIO for and president of Evinger Consulting firm in Roseville, CA. If spirits are low, or rumors of nonpayment abound, it’s time to devise a payment strategy. Such a move, he believes, includes being in close contact with the accounting department.

Evinger, with six years in technology as a consultant in the Bay Area and now as a CIO, has dealt with late payments as a consultant. Several years ago, with one of his largest clients, Hewlett-Packard, Evinger submitted his first invoice as an HP vendor. Three weeks into a 30-day net invoice, Evinger said he had a “gut feeling” that something was amiss. After checking with accounts payable, he discovered that he was right: It would take another 30 days to receive payment due to his new vendor status and related paperwork.

“HP, like any large corporation, is not going to handle its documentation and paperwork very well, at least the first time,” he said. But by inquiring early on in the typical 30-day period that invoices are due, Evinger saved himself several weeks of frustration and got the paperwork rolling.

Don’t overreact
When a payment becomes past due, Evinger suggests taking a rational approach before taking action.

“I’ve talked with programmers who have this terrible attitude of ‘I can go out and get something else,'” explained Evinger. Especially with small companies, “you have to understand other people’s situations, because eventually you will need them to understand yours.”

Assuming the best about the client is the advice Catherine Berlin, founder of the law firm Altreuter Habermehl in New York City, believes consultants should follow. A call to confirm that an invoice was received is essential to ensure it is ready to be paid.

“Call your contact at the company and make sure that the nonpayment is not an oversight,” Berlin said. “This gives your client a chance to save face and make things right without missing a beat on your business relationship.”

Contact the project sponsor
If the delay persists, it’s time to involve your project sponsor, suggests Andrea Michalek, president of Topular consulting firm in Harleysville, PA.

In 18 months of consulting, Michalek has had several instances in which securing a paycheck was a challenge. Though all clients to date have paid up, it has taken some finessing.

“When you’re hitting a brick wall, don’t be afraid to contact the person who really wants the work to be done: your internal sponsor,” Michalek said. “You say, ‘The work is going great. I’ve been sending you status reports, everyone is happy, but I’ve got to tell you, getting paid is an issue.'”

Raising the payment problem to the sponsor gets their attention, and asking for their advice will often unstick the process, she said.

Renegotiate payment terms
When payment is delayed by more than 30 days, try to set new payment terms, Evinger said. It’s possible that the company can pay a partial invoice, or that other terms are negotiable.

“It depends on where you are fiscally. If you can afford it, work with them. But if you’ve got to have money, it’s business,” Evinger said. “Maybe you can work something else out. There are always possibilities.”

The most important aspect, Evinger stresses, is to remain in communication with the company and your contacts. You should also follow up each conversation with an e-mail to keep for your records.

If you decide to renegotiate payment terms, certain benefits can be established that reward timely payments. Normally, as an incentive to clients to cut checks early, Michalek extends a 1 to 2 percent discount on invoice totals if checks are submitted within a certain time frame.

Consider alternative tactics
Before turning to a collection agency or a filing in small claims court, consider alternative, albeit potentially uncomfortable, solutions. For Michalek to receive a check in one situation, it took a daylong sit-in at a client’s office that had delayed payments for several weeks.

After working onsite for three months, Michalek returned on the day her invoice was due and sat in an office near accounts payable with her laptop. “I tapped my laptop case and told him not to worry—I have a lot of work that I can do while I wait,” she explained.

After a few hours, the payment was finally made. Most importantly, said Michalek, her relationship with the company remained intact—so much so that she would still work for them.

“When you deliver a product to a client, it’s a gift: It’s only a business when you get paid for it,” Michalek said. “Your business is not just creating technology on behalf of your client, it’s following that process all the way through.”

Another option is to simply stop working for the client. Evinger says he walked out on two clients, both startup companies, after endless promises were made about additional rounds of funding, which would pay his invoices. When the funding never materialized and the invoices remained unpaid, he also filed a claim with the Better Business Bureau against one of the companies to keep a record of its misdeeds.

Evinger believes consultants need to follow the “Three Strikes Rule” and ask themselves just how badly they need clients that do not pay: “By the third time, if you’re being told you’ll be paid on a certain date—unless they’re showering you with free laptops and trips to Hawaii—what’s the point?”