Checking Out Your New Clients

So, congratulations, you’ve won a valuable new customer – Peroni Time!

But before we get too excited it might be worth spending a couple of minutes to see what you can find out about your prospective new customer. Because the last thing anybody wants is to invest a lot of time, effort and materials just to gain a bad debt.

Checking out your client’s latest set of financial accounts from Companies House won’t cost you anything, will only take a couple of minutes, and is publicly available information. In my opinion it’s certainly worth doing before you have agreed your terms of business.

Do remember though that the information you will be looking at is a snapshot of the company’s financial position at a given date. Financial performance is affected by a huge number of variables, both internal to the company and external (eg a global pandemic). The situation can change very quickly.

Here’s how you do it:

1. Google: Companies House / Get information about a company https://www.gov.uk/get-information-about-a-company
2. At ‘Start Now’ enter the company’s name or registered number
3. Q. How long has the company been established? Are there companies with similar names that have recently been dissolved?
4. Click on the companies name, this will take you to the Overview tab
5. Q. Are the ‘Accounts’ showing as up to date?
6. Click on ‘Filing History’ then click on ‘Accounts’ then click on the most recent filings.

Balance Sheet:

1. Check Current Assets relative to Current Liabilities
2. Q. Could the company pay its short term debts if it were to convert all of its current assets to cash?
3. Q. From your knowledge of the company how quickly do you think they could convert all of their current assets to cash?
4. Check the Capital and Reserves
5. Q. Do the retained earnings and share capital look sensible, or have the directors withdrawn everything they possibly can?
6. Check the latest figures against last year’s figures
7. Q. How do the figures compare? Are the Capital and Reserves growing or decreasing? Also check the Creditors (amount they owe) against Debtors (amount they are owed). Increasing or decreasing?

Profit & Loss:

1. Check the Turnover
2. Q. Is this inline with your expectations?
3. Remember: ‘Turnover is vanity, profit is sanity!’
4. Check the Net Profit (Bottom Line)
5. Q. Are they generating a healthy profit?
6. Q. Overall, how confident are you that your invoices will be paid in full and on time?

Any problems or concerns, you know where I am.