What you do really depends on how much money is involved and how much of YOUR time you want to waste.

If a customer refuses to pay, why would you want them as a customer?

If the product is a software/hardware design, copyright it. The form for software is 2 pages and can be downloaded from http://www.copyright.gov/. The filing fee is really cheap and you don't need a lawyer. Then, if a customer doesn't pay, you have a little more clout on your side in the form of Copyright Infringement. This is more of a thing for you as the developer. I've had to use this argument once in 25 years. It was worth it at the time.

When I was consulting, the problem that I saw many other consultants and small businesses have was that they had only 1 or 2 customers. So losing 1 was a significant part of their business. Even if the customer had serious payment problems. In those cases, my opinion is, find another customer. I know this is difficult when you spend most of your time with a single client. So, pick clients that you KNOW can pay you. I actually found that fortune 500, large companies, and government agencies were always quite reliable. When I worked with very small companies (1-5 employees) it was always a struggle to get paid.

Every day you don't get paid is money (interest, utility value of the money, whatever you want to call it) that YOU ARE LOSING.

Make sure you are extremely precise with terms and when payment is expected. One week before payment is due, call the client to make sure there is nothing that will inhibit them paying you. This is extremely important that the client tells you, "yep, this is great, we'll send a check next week." IT's much harder for them to then say, hey, this crap doesn't work.

On the day the bill is due, call to ask if the payment has been sent and what check number was used. Contact the accounts payable department every week until the bill is paid. You'll get better response if this is via a nice one-page FAX form that the client can check off boxes (excuses why you haven't been paid) and fax back to you. In the same way that the squeaky wheel gets the oil, the pesky bill collector gets paid. Note, I said be pesky but do not be unfriendly or threatening. Also, do not explain why you need to get paid or that you are starving or that you need to fix you car. That is unimportant. The client must pay their bill as agreed.

Many companies have a policy about paying bills. The policy is, pay them as late as absolute possible. In many cases, a company is actually waiting for you to contact them 3 times about a payment that has not been received.

After your invoice watchdog timer resets (30 days, 60 days, 100 days, or whatever) submit everything to a collection agency and tell your client that you are doing so and the name of the collection agency (but wait 1 week -- you'll probably get paid because most legitimate companies do not want to deal with collection agencies). If you do have to send it to an agency you are now out of the loop and should let the agency earn their money. These guys REALLY work. You'll see as high as an 80% collection rate. The cost is around 30% of the invoice. But, you don't have to deal with the headache of collecting from a deadbeat.

It is a good idea to write down you procedure for how to deal with this and what to do each week the bill is late. Consistent follow-up with late payers is the key thing.

All this aside, the best policy is always CASH UP FRONT. That's where the phrase CASH IS KING comes from and that's what it means.

Good Luck.

Jon