Taking on a new client can be a lot of fun. It means more money coming in every month and a better financial situation for you and your family. But working with clients (and without the protection of a corporate apparatus) can also be a nerve-wracking experience.
They say that they will pay you, but will they?
In this post, we’re going to take a look at all the tactics that you can use to sleuth on your clients and check that they will actually cough up the money when the time comes.
Check Their Published Accounts
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All limited liability companies are required by law to publish their accounts publicly. So if any of your clients are LLCs, you can quickly check out their recent financial status online. Most countries tax authorities publish the last accounts for the company and make it so that you can search for them.
Ask yourself questions that indicate the financial health of the firm. Did they turn a profit last year? How much debt do they need to pay off relative to their income? Are they growing over time? Eventually, you should get a sense from their balance sheet whether they are good for the money or not.
Search Using The LEI Number
LEI or legal entity identifier is an alpha-numeric code that specifies a particular company, trust, or charity. LEI lookup is a service that some people use to find out more information about a specific client. The data you get isn’t as comprehensive as it is for company accounts, but it is an excellent way to find out whether your client has a legitimate business interest or not. Remember, all companies and individuals who want to conduct financial transactions and trades must have one of these.
Go To A Credit Checking Agency
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Not all clients will publish accounts online, but you can still find out crucial information about their financial status. Just like banks, lenders and utility companies, you too can go to a credit rating agency to find out more about their business history. If their rating is poor – which it could be – it is a sign that you might want to take precautions, like asking for money upfront. If their score is excellent, then it is a signal to go ahead.
Ask For Bank References
If you’re worried about the ability of a particular customer to pay you for something, you can ask them to provide a bank reference. This document is essentially a promise from the bank that your customer has sufficient funds in their account to cover your costs.
So, for instance, if they want to spend £50,000 on your services, the bank reference tells you that they have at least that much in their account and that they can comfortably pay the bill. Estate agents will often do this when a buyer wants to
Sleuthing on your customers might seem like a bit of faux-pas, but when your family’s income is on the line, it is certainly something that you’ll want to consider.