Research Your Client in AdvanceIf you have a new client, or an older client is returning after a few years away, you should sit down to perform some research. Google the name of the company and see what comes up. Ask your other industry contacts if they know anything about the client, and check to see customer or client complaints on sites like the Better Business Bureau. A small amount of time spent screening customers in advance can minimize your risk of acquiring a non-paying customer.
Pay Attention to the News…Or Lack of NewsYou should also regularly check out what is going on with your clients online. Just like you pay attention to politics by reading the news, industry sites and publications are also a great way to stay informed about your clients. Keep your eyes peeled for press releases, news about mergers and other news items. In the same vein, you should also pay attention to a sudden lack of news. If your client was regularly covered in a number of technical publications and everything is suddenly quiet, it’s a sign that something is going on behind the scenes.
Know the Signs a Client Might Not PayBeyond checking the news to stay informed about your clients, you can also extrapolate a high potential for nonpayment from other client actions. What are the signs that a client might not be planning or able to pay?
- The client wants work to begin right away but has not made any effort to pay or provided an assurance that payment is on the way. Depending on the industry, services being performed before an invoice is delivered might be common. However, if a customer speaks about the budget in abstract terms and makes no assurances of payment by a certain date, they might want to take your service or product and run.
- The customer promises future earnings as payment for services and products currently being used. Sometimes, these customers can be entirely legitimate. However, when you are in that situation, you should pay close attention to the contract and make sure that the reward will offset the potential risk of the situation.
- Does the client have an accounts payable department? With small businesses and new clients, it’s not uncommon that one person will fulfill many roles. However, lacking an accounts payable department or person is a sign that payment might not be coming your way.
- Is the customer requesting deadline extensions for every invoice? If you get a new customer and they are already requesting an extension, it’s a sign that cash flow is inconsistent, or they might not have enough on hand to pay. If the focal point of your new client is the due date for payment and not anything else, it’s a sign that you should keep an eye on that client.