I watched a television commercial featuring several people who own small businesses (really small, like one-person shops or a business with fewer than six people). They talked about customers or clients who were just down the street.
That got me thinking that their clients could be people they know outside of a business relationship. They may, in fact, be friends. Doing business with friends adds to the complexity of the relationship.
It’s harder to ask for money from a friend. It’s the primary reason we counsel people not to lend money to friends. Getting paid back can be risky, and resentment over an unpaid debt often ruins the friendship.
In business, when someone owes you money for work, they have, in essence, borrowed from you. Business people will tell you that clearing accounts receivable is one of the most unpleasant parts of their jobs. Many businesses build an expense line into their budgets to account for people who don’t pay bills.
Now, add in the complication of the client being a friend and the problem gets trickier. Yet, people do business with friends. Here are three tips to help make that business relationship successful:
Bids. Make sure you spell out the scope of work very carefully. When dealing with a friend, the danger is to be loose. Lack of specificity is the start of having the work not go well, increasing the chances of payment disputes.
Contract. When you go to a service area for work on a car, they routinely look at your vehicle and provide an itemized proposal for the work that needs to be done. You sign on the dotted line. Similarly, you need to draw up a contract with your friend, identifying, the work, deadlines, and payment schedule for the work. Have your friend sign the contract to indicate agreement to its conditions.
Payment. Getting paid is the hard part, especially when friends drag their feet. It’s amazing how fast money can become a problem between friends. Be firm, but not angry in any communication. One option to help avoid the problem of getting paid down the road is to have payments due at specific completion points throughout the job.
Finally, even though this is your friend, avoid the temptation to make promises that you can’t deliver. It’s better to say “No” upfront than risk serious harm by not doing what you promised.