How IT contractors can health check clients, agents, umbrellas

For many an IT contractor, the long awaited major order or role is the whole reason to be in business. Using your IT skills to your maximum advantage.

However, whether the client, recruitment and/or payroll company you approach is a small business or a very large one, it is vital for you to ensure that the company you are about to deal with can and will pay you for your expertise, writes Sid Home, managing director of Safe Collections, a debt recovery and credit reporting agency.


Remember that before you commit yourself to a commercial party and permit an agency or client to receive your goods or services prior to payment, you must be completely confident that you have made a wise investment, as that is precisely what you are doing. You are investing your time and effort into their company or their client's company.

Taking the few straightforward steps outlined in part 1 and 2 of this guide will give you a better chance of ensuring a harmonious and mutually profitable relationship. You should of course be well placed to receive payment. But more critically in the current climate, you must also be prepared to do more than just hope that payment is administered promptly and in full.

Credit Worthy?

Even astute business people employ the most curious criteria in assessing credit worthiness of a client, recruitment or payroll company. Wrongly, and too often, the contractor approaching one, two or all three of these entities thinks:

o They'll be OK. After all, they are a limited company/PLC
o I've heard they're doing really well
o They're massive
o They're a household name
o They're part of a huge group
o Just look at their prestige address - even the building/road is called after them

Hearsay and casual observation is not sufficient. Woolworths was a massive business employing thousands of people and turning over hundreds of millions. They went bust and took a lot of small suppliers with them. Clothing retailer Ethel Austin is a more recent example of a company placed into administration. And in the IT sector, Albany Group is the latest company to suffer the same fate.

What must be deduced for the purposes of an IT contractor's credit assessment is:

1. Who/what are you dealing with?
2. Where are they located?
3. Do they have the money to pay?
4. Are they prepared to part with it promptly?

One of the most important aids in answering these questions is a good measure of self-confidence. Consider, very carefully, the following assertions:

o A sale is not a sale until the money is in the bank. I shall ensure that it arrives there
o In granting credit facilities to a client, I am making an investment in their business
o It is my duty to safeguard that investment
o I am quite within my rights in seeking answers to questions 1-4 (above)
o I am not doing anything subversive, underhand or devious in enquiring into my applicant's/client's/ agency's affairs and I shall display no reticence or shyness in so doing

It is important to extend this self-confidence to recognising your own 'business clout.' You may be able to be selective in your choice of clients. If so, take full advantage.


No matter how large or small your company or consultancy, one of the most important aids in building an accurate profile on your prospective customer or agency, is a well-designed Credit Account Application form.

This should be completed by all your prospective customers. It will be likely that your prospective customer, albeit an agency or client, will wish you to sign a contract. You must be aware that this document, duly signed, could countermand your own terms and conditions.

It is imperative that any contract proffered to you, as a contractor in any sphere, is thoroughly checked by your professional body or a competent lawyer,
experienced with contract law. Getting it right at this initial stage will reap considerable benefits in the longer term.

Check precisely, within the contract, as to when payments will be made to you after submission of your invoice/s. If it is not included then make sure it is with when you require payment to be made.

Also, check whether you are required to attach signed time-sheets or other documents to your invoice/s. Be wary of any strict restrictions on submission of invoices. We have seen contracts wherein the stipulation was the invoice must be received, with signed time-sheet within 7 days of completion of that week's work. Late submission caused our client many difficulties in obtaining payment. And even though we were ultimately successful, it was stressful for our client. Imagine if the customer denies receipt of the original invoice and time-sheets? This would be a nightmare scenario, as the contractor would be too late to provide copies within the contractual time frame.

Once your applicant has completed the Credit Account Application form, or you are totally confident you know with whom you will be dealing, you can put this to work for you very effectively. Close scrutiny of each section on the form will yield a wealth of information about your prospective customer. We can provide a sample of a credit limit application form upon request or it may be downloaded in our free guide to Credit Control.

Devil in the (lack of) Detail


Consider the name on the contract or CLA (Credit Limit Application)

Establishing the identity of one's prospective client is extremely important, yet it often seems that the elation which follows on securing a contract, sweeps aside such mundane considerations as obtaining the correct name of the potential client. All too often, and too late, enquiries are only instituted when things start to go wrong. You must therefore make sure that you are in possession of the complete and correct name under which your applicant trades.

o A trading name can be employed by the following:
o A sole proprietor
o A partnership
o A limited liability partnership (LLP)
o A private limited company (Ltd)
o A public limited company (PLC)


Limited companies, the preferred vehicle in much of the IT sector, may change their names, but their registration numbers are permanent. The only real form of identification for a limited company is its registration number. It is therefore essential you have this. It should be noted that Scotland has its own registration system and numbers usually preceded by the letters SC.

One thing to remember is the lower the registered number the longer your subject has been in business. Look at your registration number if you are a limited company and compare your registered number to the client's or agency's number. This is helping you build your own profile of the people/companies you are about to do business with.

In terms of the name of the entities you are about to engage with, consider the following for your Credit Account Application form:
o If you take the details over the phone, be sure to record the name absolutely exactly, up to and including any idiosyncrasy in spelling. It is vital that you obtain the correct name at the opening stage. This is extremely important and would certainly be of paramount importance in a court of law
o If you receive from the client/agent in post, make sure that the applicant has inserted their "Trading Name" legibly. A business-like approach is suggested, especially if the form is typed. Be sure now to match this professionalism by ensuring that when you transfer the name to your ledger, you do so exactly, up to and including any idiosyncrasy in spelling or punctuation. This is extremely important and again could certainly be of paramount importance in a court of law.
o If the trading name contains initials, you must, no matter how laborious it might seem, ensure that the initials are used at all times, i.e.: "E.K.J.R. Smith Ltd" must always be referred to as just that, never as "Smith Ltd"
o If the trading name is a long one, never be tempted to shorten it, i.e.: "Take Your Money And Leg It Ltd." must always be referred to as just that, never as "T.Y.M.A.L.I. Ltd".


When presented with the address of prospective business partners, take a long, hard look. First, ask yourself and think carefully about where you would expect them to be situated. Before dismissing an award-winning consultancy as having made a mistake for providing you with a residential-sounding address, remember that the 1990's saw the beginnings of a hugely popular trend for working from home that continues today.

It is entirely reasonable, therefore, to find private individuals conducting professional consultancy and many other types of enterprise from private residences. However, these will mostly be business people whose credit needs are not great. So if it transpires, upon enquiry, that the address quoted to you is indeed residential, an alarm bell might ring if the credit sought were sizeable and unusual.

In considering the name of the company, we caution against delusions of grandeur on the contractor's part. This is equally applicable to the address itself. Just as "Intercontinental Imports" could apply to a prestigious multinational organisation or a 'tin pot firm', so too could "Intercontinental House" comprise a large luxurious freehold office block, or a fold-away booth in a suite of serviced offices. There are several service companies in the London area alone that offer a desk and a phone on an hourly basis. Ideal for the international businessman perhaps, but contractors should consider the shadier purposes to which such a facility could be put. Never mind 'here today and gone tomorrow', more a case of 'here this morning and gone this afternoon.'

If your applicant/client/agency possesses only one address, it is important to check it carefully and to satisfy yourself that it is entirely appropriate, since it is to this address that your invoices are to be consigned and from which payment is to be made to you.
If your applicant possesses more than one address, this would seem to suggest a concern of some dependability.

Once again, it is important not to be taken in by suggestions of stature or size, until these are confirmed. Time should be allocated to scrutinising each of the addresses, so that there remains no doubt whatsoever that they are entirely appropriate to an apparently large business. It could of course transpire that your client has a vast number of branches, but the particular branches that will be of interest to you, as a contractor, are a) the head office b) the place to which your services are to be delivered and c) the place from which payment is to be made.

If the address consists solely of a P.O. Box number and town, we would advise that you employ extreme caution. Whilst we have no reasons to doubt the status of any legal entity operating from a post office box number, considerable complications could arise should credit be sought from such an address and non payment subsequently ensue. Contractors faced with a 'P.O. Box' must take steps to ensure that they obtain from the party/client/agency the full trading address before granting credit.

Don't forget to consider the humble postcode - it is an important mark of identification. Make sure you have it - in full. And beware of any company that has an ex-directory listing. Ask yourself (and if necessary your client) why they are not seeking to promote their business by making the telephone number available to the public.


At some stage, you will probably have occasion to ring your applicant. Aside from taking note of names for your future reference, ask how many other points of human contact they have available.

Of course, getting money you're owed from a client, agency or payroll company can be considerably harder if they have just one contact point, particularly as you are unlikely to be the only creditor using it to get through in the event of non-payment, or worse.

E-documents and Resources

Filing of documents is a legal duty for private and public limited companies. So recruitment, client or payroll companies that are 'Ltd' or 'Plc' must file annual documents with the Companies Registry. These documents detail the financial state of the company, as well as the names and addresses of those engaged in its management and involved in its ownership.

To get the 'inside track' on prospective parties in your contractual chain, you can view some of these documents, relatively inexpensively, by accessing Companies House online. Also, the Professional Contractors Group has access to online credit reporting services which they make available for members.

Documents from Companies House can be particularly useful for limited entities but if you are a contractor dealing with a proprietorship (or also a partnership), you should always have the owner/s home address together with any business address. This information can prove of vital importance should you encounter difficulties in late payment of invoices.

You can gain insight into the proprietor's payments by using a reputable Credit Reference Agency to carry out a county court judgements check against the place of his / her residence and his place of business.

The most curious and diligent contractors have also been known to use the internet to view the location of the proprietor's address on aerial maps. It can prove very interesting viewing, revealing small but potentially significant details, even down to the number of vehicles parked in the drive!

Part 2 of this guide will be published on CUK tomorrow

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