The importance of due-dilligence when dealing with clients.
Doing business can be tricky. Whilst you might think you’ll never have any problems, all it takes is for you to cross paths with a slimy ‘ruthless’ businessman and he’ll eat you for breakfast. Some people see business without the human element, they think only for themselves, and whilst this means they might be all positive to your face, they will easily make decisions that benefit them at cost to you. Sometimes these decisions are made without much choice, such as they need to make cutbacks to their business; but most of the time it’s because these people are greedy and they behave in such a way because any retaliation options you have are often complex and costly to pursue.
For example, I’ve seen many times people who were paid on weekly payroll not get paid their final weeks salary, because the company knows that it would cost the leaving employee far more in time and money to recover the funds.
That said, there are ways to protect yourself, and ways to identify these types of companies in advance. This way you can either avoid them, or do business with them in a safe as manor as possible.
No matter how new or small you are, draw up a contract. Even if it’s basic, let the other side know that they must respect you and not just drop or change payment terms or what it is they are paying you for and why.
For example, if they need some documents to be provided before payment, they should indicate this upfront rather than get you to do the work and then ask for it. Unexpected changes like this do not bode well for the future of the working relationship as it means that they do not respect the agreements they have made, nor the time it takes you to accommodate their changes.
If changes are made, you don’t have to accept them. If things no longer work out for you, or their business changes - there is no need to stick around and do something you don’t want to. If you value your time, your career, don’t let them hold back - move on.
Warning signs to look out for:
- Is (or was) a director of numerous limited companies, in particular ones that are ‘in-liquidation'.
- Is not a director of their own company they manage now (in particular if they have their solicitor listed as a director, but not them themselves).
- Is not a director of a company they say they created or managed in their past. It’s easy to make big grandiose claims like “I setup Apple in India”, but this needs to be backed up by documents. When no documents can be found, it’s starts to all look a bit false.
- Your checking should include looking at foreign company registers. Each country generally has their own company register (such as Companies House in the UK). Nearly all registers I’ve ever seen have a company entry on a register linked to legal issues in the court, in particular to do with bankruptcy charges. It’s common to see people with companies listed in overseas countries, that when you check, either don’t exist, or belong to someone else. This is common, as not all company registers are easy to check. Some don’t have online portals, while others are not in English - so it’s hard to pull up and verify information. They rely on this difficulty to prevent you from discovering their deception.
- Their children are the directors of their company. This is common for disqualified directors. No longer able to manage a company themselves, they nominate their children. This is even more common when their children have different names, such as a daughter who got married. This makes spotting the ‘shadowing’ harder because the new director doesn’t appear related.
At the end of the day, it is in your own personal interested to avoid, or calculate the risk, in dealing with a company. Performing due-dilligence is important because if the company runs into problems, you will be the one who will suffer financially.
It, however, will come as no surprise that companies you will have payment issues with are the ones that have these warning signs. If one of these companies (or even one that previously came up as healthy) pays your invoices/salary late; it should set alarm bells ringing. If they do this once, a warning to them might be sufficient. A second time? Well it sounds like these people are just toying with your livelihood to which you depend on; and that is not cool.