When it comes to doing business with a potential new client, an important question to ask yourself is, can you trust them to pay for your services. There’s nothing worse than delivering your product or service only to be faced with a late or non paying client. Not only will this impact on your cash flow but in some cases, bad debtors have been the downfall of many start-up businesses.
There are several ways you can minimize bad debt and safeguard your business. The simplest way is to ‘get-a-feel’ for the client by asking them detailed questions during the initial consultation. If they have a website, get an impression of their clientele by checking for a client portfolio or testimonials. If you’re still unsure, you could request references or carry out a credit check on the company. Search online for a service that offers a free trial and has access to data from across a wide range of resources including Dun and Bradstreet. See ‘Skyminder’ for an example: http://www.skyminder.com/basic/info_sources.asp
In addition, you could request a retainer fee or deposit payable in advance with interim payments throughout the course of long-term projects. This allows you to cover some of your costs and reduce the amount of debt, if faced with a non paying client upon final delivery. But this approach brings with it additional work as you need to keep on top of your payments and receipts; making sure invoices are sent frequently and tracking the funds into your bank account.
Alternatively, you could decide to refuse the client credit and ask for full payment in advance before any work commences. It’s not unusual and most new clients will understand your concerns, as they too would have been in the same predicament with their own clients at some time. At least once you’ve built a solid relationship with the client and trust is established, you can always show how much you value their custom by offering them credit.
In any event you should always trust your gut instinct. If you still have serious doubts that the client is not credit worthy then don’t take the risk. After all, you don’t want to find yourself unable to meet your own financial commitments, ending up yet another statistic on the bankruptcy register.
