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Rob Rees, Divisional Director of Markel it comes to clients that are bad payers,
Direct, pecialist insurers of freelancers and however, there are things small business
small businesses, shares the effect late owners can do to limit their risk.
payments can have on SMEs and sole
traders, while providing expert advice on how Before entering any business relationship,
they can protect their finances. In today’s take the time to vet the potential client. Credit
climate, marred by surging inflation, a cost- reports and credit scoring services can
of-living crisis and energy price hikes, late offer insights into their financial stability and
payments are a growing threat to small-scale payment track record. Both Experian and
entrepreneurs and sole traders. Our survey Equifax are examples of companies that can
of 560 freelancers and SME owners revealed offer this service.
that 22% experienced an increase in late or This upfront due diligence can help you
non-payments last year.
identify red flags, make informed decisions
The data also showed that nearly half of the about whether to engage with a particular
respondents had payments owed to them that client and save you from the frustration and
were over 15 days overdue, while 13% stated financial strain of dealing with late-paying
they didn’t get paid at all and had to write off clients down the road.
the money owed.
Other checks could include:
Late payments can create a perfect storm of Checking the prospect’s website for
financial issues for small business owners, legitimacy and feel
including difficulty paying their own staff and
suppliers, managing cashflow and stifling Asking for references on your customer
reinvestment in their business. from suppliers and banks
Getting paid on time can be the difference Carrying out a search of the official
between a business thriving and a business Register of County Court Judgements
struggling, so it is vital that freelancers and
SMEs do all they can to help future-proof their Consider asking for a deposit or
finances from unexpected issues, such as late staged payments
payments. Luckily, there are some essential Consider requesting a deposit, or
steps that can help business owners protect implementing staged payments, to secure
their finances and safeguard the longevity of your financial interests on a project. By asking
their businesses. for an initial deposit upfront or breaking
down payments into stages based on project
Seven tips to help you protect your finances milestones, you not only reduce the risk of
from late payments as a freelancer or SME. late or non-payment but also establish a
commitment from your clients.
Research new clients and their credit
history This approach can provide you with a steady
There’s no ‘one-size fits all’ solution when
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