Are credit checks for new customers expensive?

Are you a small business or freelancer about to start work on a long-term project with a new customer? Perhaps you’re a bit worried about how and when you will get paid. You know you need to run credit checks, but are they expensive?

It’s always great news when you get a big project in and because you’ll be committing a fair chunk of your working time and possibly money on this, do a few credit checks first. It’s not expensive and could make all the difference to your future cash flow.

Do an Internet search

It’s free and one of the quickest, simplest ways to find out about an individual or a company. Look at the business website, what does it say about them? If it’s a UK limited company, it should state the company number somewhere on the page. Most businesses put it at the very bottom of the page.

Check online with Companies House

Again, completely free – won’t cost a penny. Now you know the business name and company number go to the Beta Companies House website to find Company overviews, who the current and former directors are and if any directors have been disqualified. You can see the latest accounts and official documents submitted to Companies House by the business.

Is it a start-up business?

If your new customer is a start-up business, you can guess budget and cash flow could be an issue. If you’re about to start working with a one, I recommend you ask for a time reservation fee or payment up front.

Credit checks - know if your customer will pay on time

Credit checks – know if your customer will pay on time

Check for CCJs and other Court records

If your customer is an individual or sole trader, you can still do some basic checks with the Registry Trust to see if they have any County Court Judgements or bankruptcy filings.

Registry Trust is a not-for-profit company which operates the Register of Judgments, Orders and Fines for England and Wales on behalf of the Ministry of Justice, as well as similar registers for Scotland, Republic of Ireland, Northern Ireland, the Isle of Man and Jersey. All the information in the registers is public information and anybody may access them using the Trust Online site. You can check your own records or the records of other people or businesses.

Should I ask for a bank reference?

Only you can decide but it’s not free. If the contract you’re going to be working on involves a lot of money, like thousands of pounds, it could be worth it. Bear in mind, it’s only the bank’s opinion about ability to pay. It’s not a financial assurance and the bank will only do it if it has the customer’s permission and you’ll have to pay for the reference.

Get a Credit Report

If you’ve done all the free checks and something’s still niggling, then it may be worth spending a small amount of money and going for a full credit report.

There are three main credit reference agencies in the UK: CallCredit, Experian and Equifax and. To get an Experian credit report, you will need to sign up for the monthly access which is £19.99 per month (the minimum term is 12 months) for unlimited credit reports. But if you only want one report, you can sign up for a 48- hour trial and get one free report.

Why is running a credit check before signing a contract important?

It’s important because the outcome of a credit check will determine if you need to adjust your terms and conditions.

Check before you say “yes”.

Before you send a proposal to a new client make sure you know you’re dealing with. It’s natural to get excited about it and leap in with both feet but just take the time to check.

If your search turns up something you’re not sure about, it’s not the end of the world and there’s lots of ways you can change your contract to make sure you get paid for the work.

Your contract with your customer and cash flow are directly connected. A bespoke contract, written for a specific product, service or event will protect you and your business and make sure you get paid on time so revise your contract for every new customer, product or service

Need help? Get in touch

Do get in touch as I’d be happy to advise on what questions to ask and how to adapt your contract.

I’m Rachael, the Contracts Lady and Cash Flow Queen and I make time for anybody who needs a chat. Book 15 minutes with me

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