As a community service, the Law Offices of Karen M. Riggio, LLC publishes a complimentary e-newsletter designed for business owners and independent contractors. Each month, we offer valuable tips and practical, real-life answers to today's common contract issues and collection problems. Feel free to e-mail us your suggestions for future articles.

Karen M. Riggio

New trends in legislation plus the downturn in the economy are making things more difficult for small businesses. It is more important than ever to know who your customers are and approach credit in a new way.

For example, beginning in January 2009, a new law in New York dramatically affects judgment collections. Couched as protection from unscrupulous debt collectors for senior citizens, the new law exempts $1,716.00 per bank account from judgment enforcement. So if a company has a $1,000.00 or $1,500.00 limit and the customer refuses to pay, the customer needs only to have several bank accounts with a $1,716.00 maximum balance, and all will be exempt from judgment. And if New York State is doing this, can other states be far behind?

You can protect yourself and avoid potential problems if you set up more stringent credit guidelines. Protection begins with:

• Knowing who your customers are by running credit checks and obtaining employment data
• Developing credit applications and contracts that very clearly state your services, pricing and credit terms
• Determining in advance what the payment arrangements will be, such as cash on delivery, a credit card on file, a debit card or checking account number on file

Remember, when a customer doesn't have the money to pay you, he can complain that you didn't do something you promised or you weren't clear about the price. Approaching credit in a business-like way protects both you and your customers, resulting in more loyal, trusting relationships and better, more hassle-free and profitable business.