Received the following email from a student of mine who is running his own consulting business. Reminds me of a problem I used to have "back in the day" when I was still a consultant: customers who drag their feet when it comes time to pay. It's a problem for every business owner who extends credit to their customers. A situation to be handled delicately, for sure...

Q: I have a client who has spent a significant amount with me in the past, but they are now falling behind on payments. They reimburse me for their hosting and private SQL server costs, but I have been paying these fees upfront. They have been too busy and waiting for vendor payments for months now, and I have held off on doing more work while waiting for them to pay. I believe they will eventually pay, but in the meantime, I am stuck covering their expenses. How do I politely let them know that if they do not pay, I will have to cut off service?

A: This is a tough spot, but it is important to set boundaries. You are not a bank, and you should not be floating their business expenses indefinitely. Here is how you can handle it:

Stop covering their hosting costs out of pocket. Let them know that moving forward, they need to either take over the payments directly or prepay you before you renew anything. If they cannot do that, you need to consider shutting the server down or at least warning them that you will. They are there to make you money, not cost you yours.

Propose a partial payment plan. If they truly intend to pay but are waiting on their own clients, give them a structured way to chip away at their balance. If they owe $2000, for example, suggest they start paying $250 per week or whatever makes sense for your situation. This keeps them accountable while maintaining the relationship.

Draw a clear line. If they refuse to make even a small payment, that is a red flag. At some point, you have to decide how much risk you are willing to take. If they really value your services, they will find a way to pay something to keep things running.

Most importantly, set expectations before this happens again. Clients who repeatedly delay payments should be required to prepay for ongoing costs. Your time and resources are valuable, and a good client will understand that.

Personally, I would never float a customer on anything that required me to pay upfront. Back when I sold computer equipment and networking services, customers had to pay for the equipment in advance. I'm not a bank, and I'm not a credit card company. If they have good credit, they can get a loan, put it on their credit card, or figure something else out. But I would never front those costs for a customer. And yes, before I had this hard and fast rule, I did get stiffed once or twice.

So if you're paying for their hosting and private SQL server, they need to cover it upfront, or I would shut the server down.

As for your services, find out what they are willing to pay weekly, get a credit card on file, and charge it automatically. If they fall behind a certain amount, whatever threshold you decide, be firm. Let them know, "Look, I've got other clients who are paying, and I've got a business to run." You have to stand your ground. You do not want to lose a big client, but you also cannot let them take advantage of you.

Just like Goldie Wilson said, "Don't you know if you let people walk over you now, they'll be walking over you the rest of your life." And he went on to become mayor of Hill Valley!

Read more of my Advice for Consultants.

Are you a consultant who's had this kind of problem before? How do/did you handle it?