Tuesday, 01 November 2016 11:14

5 Red flags to spot risky freelance clients

Having to deal with invoices that are not paid on time is stressful for any business owner. Late payments can seriously disrupt cash flow, take precious time to sort out, and can sour relationships with clients.

Most late payments are one offs and arise from perfectly understandable circumstances. With a little dialogue and a little patience, most can be resolved amicably. But what about that small minority of clients who persistently pay late?

What about the even smaller group who deliberately avoid payment? Unscrupulous operators do exist, and the best defence for business owners is to be on your guard and learn to spot the warning signs.

The sooner you know when patience will not work with this particular client, when it’s time to take a harder tack, or even when it’s time to cut your losses and stop wasting your time, the sooner you can focus on the core parts of your business again. Here are five ‘Red Flag’ warning signs to look out for which might just tell you a client isn’t going to pay.

1. Lack of Clear Communication

This can work in two ways. Clients who are evasive in giving clear commitment to contract terms, who take a long time to reply to emails or phone calls, who generally don’t seem interested in building any kind of rapport, may well be the kind of company that look to get work done but never intend to pay.

On the other hand, businesses which struggle to give clear instructions should raise a different kind of red flag - if they don’t seem to know what they want, how will you meet their expectations? And will that lead to non-payment on the grounds of not meeting the brief? It could also be that the client does not really grasp the value of the work you are doing, and will claim they are being over-charged when you send your invoice.

2. Unprofessional Set Up

These can range from the obvious - jokey, spam-like email addresses which make you question whether you are dealing with a proper business at all - to the more subtle, such as a client not having an accounts payable department. If you do not get clear instruction as to where to send the invoice and ultimately who is responsible for payment, expect to be passed from pillar to post when payment is due.

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3. Unwillingness to Sign a Contract

Many suppliers often fall into the trap of not insisting on contracts on the grounds that the value of the work is not great and it seems like unnecessary red tape. Contracts are what protect you legally in the event of incidents like non-payment. If a client actively refuses to sign one, alarm bells should ring.

4. Strange Requests when Negotiating Terms

Late payment fees are a great way to supplier to protect themselves from late or non-payment. But what if the client asks what the terms are during negotiation, and starts trying to bargain you down? You might want to think about why the late fees seem so important to them.

5. Go with your Gut

Something just not quite feel right when you’re dealing with a client? Don’t ignore it - your business instincts matter. Think carefully about whether any of the above have set the subconscious alarm bells going and be mindful of the risk of non-payment.

If necessary, take steps to reduce your financial risk by taking a deposit or agreeing to milestone payments and if all else fails, don’t be afraid to walk away. Sometimes walking away from a customer you aren’t sure can or will pay you can be the most profitable decision.

If you have already gotten in to bed with a client that is reluctant to pay then Safe Collections can help, we have a vast experience handling payment disputes in a professional and amicable way. If you would like to find out more about our debt collection services, please feel free to give us a call today.

Over 150 Years Of Industry Experience

Our modest but highly skilled team has a combined total of over 150 years of experience in commercial credit management and B2B debt collection. From independent IT contractors to major film and TV publishers, Safe Collections has the knowledge and experience you need to get paid quickly and cost effectively.

Image Red Flag by Steve Snodgrass shared under the creative commons licence.

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