I started my first business at 19, when I was young and stupid (now I’m old and a little less stupid). I took on a client for a job that was prominent and would have been very profitable. Unfortunately, I didn’t do any checks into my client and they went into liquidation before paying me. At the time it was a bitter pill to swallow and hard on the business as I had my own suppliers and employees to pay.
Had I done a few easy checks, I would have found out the position they were in and wouldn’t have taken on the job, or requested payment upfront. I would learn my lesson.
It’s heart-breaking to see many sub-contractors, particularly at the moment and in the construction industry particularly lose a lot of money when their contractors unfortunately go under.
Thankfully there are more resources and tools that sub-contractors can use these days to protect themselves, than there were 20 years ago when I made my mistake.
Now I’m in the invoice finance industry. Our primary security in being able to help a client is them having a strong debtor. It’s amazing the amount of clients and prospects we see that provide terms to their contractors/clients that don’t do any kind of credit assessment on their potential client, assuming that there are “large” business and will be able to pay.
When working with a new client, we provide a comprehensive credit and risk assessment on all debtors and have protections available such as trade credit insurance built into our fees, to protect against the worst case scenario.
Any business can have access to these tools, which include subscribing to creditor watch, taking out their own credit insurance and for those businesses in the construction sector another good resource is builders background checks.
I urge all business to undertake a review into their debtors, and if any business needs help with this, please don’t hesitate to reach out for some free advice!
Trevor Wollard, Fifo Capital – https://fifocapital.com.au/ref/26/