Why branding agencies should assess client credit before long projects

Key takeaways

• Assessing client credit is a non-negotiable commercial step for branding agencies before committing to long, expensive projects. It prevents you from tying up your team and cash in work you may never get paid for.
• Create a simple client evaluation checklist that includes company checks, director history, and payment term discussions. This standardises your approach and removes emotion from the decision.
• Use prepayment agreements and staged payments as your primary defence against client risk. Asking for money upfront aligns client commitment and protects your working capital.
• Integrate risk scoring tools into your new business process to make objective go/no-go decisions. This turns a subjective feeling about a client into a data-driven commercial choice.

What is a branding agency client credit assessment?

A branding agency client credit assessment is the process of checking a potential client's financial health and payment history before you agree to work with them. It's about understanding the risk that they might not pay you, especially for large, long-term projects. For branding agencies, this means looking beyond the creative brief to the commercial reality of the partnership.

Think of it like a background check for your agency's income. You wouldn't hire a key employee without checking their references. You shouldn't commit your team's time and your agency's cash to a major branding project without checking the client's ability and history of paying for it.

This process is crucial because branding projects are often high-value and span many months. The financial exposure is significant. A proper assessment helps you decide if you should work with a client, what payment terms to set, and whether you need money upfront.

Why do most branding agencies skip client credit checks?

Most branding agencies skip client credit checks because they fear appearing distrustful or losing the project to a competitor. The sales process is often relationship-driven, and asking for financial information can feel awkward. Many agency founders are creatives first, not credit controllers.

There's also a common misconception that only large corporations need to worry about credit risk. In reality, small startups and fast-growing companies, which are common clients for branding work, can present the highest risk. Their cash flow can be unpredictable.

We see this pattern often with our branding agency clients. The excitement of a new, juicy project can overshadow sensible commercial checks. The result is often a painful lesson in bad debt, where months of work translate into chasing unpaid invoices instead of profit.

How does poor client credit hurt a branding agency's finances?

Poor client credit directly hurts your agency's cash flow, profitability, and team morale. When a client doesn't pay, you lose the revenue for the project and the money you've already spent paying your team and freelancers to do the work. This double hit can cripple a small or growing agency.

Let's say you run a £50,000 branding project over six months. Your direct costs (designer time, freelancers, software) are £30,000. If the client doesn't pay, you're not just missing £50,000 in income. You're out of pocket by the £30,000 you've already spent. That's a real, unrecoverable loss that comes straight from your agency's bank account.

Beyond the immediate loss, it ties up your management time in chasing payments instead of growing the business. It demoralises the team who did great work for nothing. It can also force you to turn down other good projects because your cash is trapped. According to a report on cash flow management, late and non-payment is a leading cause of business stress and failure for service firms.

What should be on a branding agency client evaluation checklist?

A branding agency client evaluation checklist should include checks on the company's legal status, its directors, its public financial health, and agreed payment terms. This checklist turns a vague feeling about a client into a structured, repeatable process that anyone in your agency can follow.

First, check the basics. Is the company properly registered at Companies House? How long has it been trading? A company that's only been active for three months is a very different risk profile than one trading for ten years.

Next, look at the people. Research the directors' history. Have they been directors of other companies that failed? This information is publicly available and can reveal patterns.

Then, review any available financials. For limited companies, you can pull abbreviated accounts from Companies House. Look for trends in their assets, liabilities, and profit. Are they growing or shrinking? Do they have significant debt?

Finally, and most importantly, agree on clear payment terms before any work starts. This part of the client evaluation checklist is where you set the commercial rules of engagement. Will you take a deposit? How will staged payments work? What is the net payment period (e.g., 14 days, not 30)? Document this in your proposal and contract.

How can risk scoring tools help make objective decisions?

Risk scoring tools help by turning subjective client impressions into objective data points you can compare. These tools analyse public data to generate a credit score or risk rating for a business. This gives you a standardised way to assess all potential clients, removing personal bias from the decision.

You don't need expensive enterprise software. Several online services provide basic company credit reports for a small fee. These reports often include a recommended credit limit, payment history indicators, and risk flags. For the cost of a few reports, you can avoid a bad debt that could cost you thousands.

In practice, you can integrate these risk scoring tools into your workflow. When a new client inquiry comes in for a project over a certain value, say £10,000, running a report becomes a mandatory step. The score helps you decide your payment terms. A high-risk score means you insist on a significant prepayment. A low-risk score might give you comfort to offer slightly more flexible terms.

Using these tools consistently builds a database of knowledge. Over time, you'll see patterns in what makes a good or risky client for your specific agency. This data is invaluable for shaping your future business development strategy.

When should a branding agency insist on prepayment agreements?

A branding agency should insist on prepayment agreements for all new clients, for projects over a set value, and for any client showing medium to high risk in your assessment. Prepayment agreements are not just for risky clients. They are a standard best practice for managing your agency's cash flow.

The most common and effective prepayment agreement is a simple project commencement fee or deposit. This is typically 25% to 50% of the total project fee, payable before any creative work begins. This fee serves two critical purposes. It secures initial cash to cover your early costs, and it tests the client's commitment. A client unwilling to pay a deposit may not be serious about the project.

For longer branding projects, staged payments aligned to deliverables are essential. For example, you could structure payments as 30% upfront, 30% on presentation of brand strategy, 30% on delivery of visual identity, and 10% on final handover. This keeps cash flowing in throughout the project, not just at the end.

Prepayment agreements are your strongest financial defence. They align the client's investment with your delivery. Specialist accountants for branding agencies often advise that clear, upfront payment terms are the single biggest factor in improving an agency's cash flow health.

What are the red flags in a client credit assessment?

Major red flags include companies with a short trading history, directors linked to multiple failed businesses, consistently late filing of accounts, existing county court judgments (CCJs), and reluctance to agree to standard payment terms. Any one of these flags warrants caution. Multiple flags mean you should probably walk away or demand full payment upfront.

A specific red flag for branding agencies is the "revolutionary startup with no revenue." While these can be exciting projects, they are extremely high risk. The client's ability to pay you is entirely dependent on them securing their own funding, which is outside your control. For these clients, tying payments to their funding milestones (e.g., "payment due within 7 days of your seed round closing") is a sensible approach.

Another common red flag is the client who wants to negotiate your payment terms aggressively before the project even starts. If they are fighting over a standard 30% deposit, it signals they may have cash flow problems themselves. A client who values your work will understand that professional services require professional terms.

How do you have the credit conversation without losing the client?

Frame the credit conversation as standard professional practice and a sign of your agency's maturity, not as distrust. Present your assessment process as something you do for all clients to ensure a smooth, professional partnership. This normalises it and removes the stigma.

Use your contract and proposal as the tools for this conversation. Instead of saying "We need to check your credit," say "Our standard terms, outlined in the proposal, include a commencement fee to secure the project schedule and staged payments aligned to deliverables. This helps us manage our resource planning to give you the best service." This focuses on the benefit to them.

Be confident. Your process protects not just you, but also the client's project. An agency struggling with cash flow due to bad debt cannot do its best work. A financially stable agency can dedicate the right team and focus to deliver an outstanding result. Positioning your financial stability as an asset to the client reframes the entire discussion.

How should you adjust your assessment for different project types?

Your client credit assessment should be proportional to the project's value, duration, and complexity. A simple logo update for an existing, trusted client needs less scrutiny than a complete global rebrand for a new, unknown corporate client. Scale your process accordingly.

For retainers, the assessment is critical because the financial exposure is ongoing. A client who fails to pay a retainer fee can create a monthly cash flow hole that's hard to fill quickly. For retainer clients, consider shorter payment terms (e.g., monthly in advance) and periodic credit re-checks, especially if their business is volatile.

For large, fixed-price branding projects, the assessment must be thorough. The stakes are highest here. Combine all elements: use risk scoring tools, insist on a significant prepayment agreement, and structure clear milestone payments. The longer the project timeline, the more important staged payments become to keep cash flowing.

Document your tiered approach in a simple internal policy. For example, projects under £5,000 might just require a check for CCJs. Projects over £20,000 trigger a full checklist and credit report. This makes the process efficient and ensures you're always applying an appropriate level of commercial diligence.

What systems can help manage ongoing client credit risk?

Simple systems like a CRM with client fields for credit notes, automated invoice reminders, and regular portfolio reviews can manage ongoing risk effectively. You don't need complex software. You need consistent habits.

Start by adding fields to your client records in your CRM or even a spreadsheet. Note the date of their last credit check, their risk score, and their agreed payment terms. Set a calendar reminder to re-check high-risk clients every 6-12 months.

Use your accounting software to monitor payment behaviour. Most tools like Xero or QuickBooks can show you the average days it takes a client to pay. A client whose payment days are creeping up is an early warning sign. Act on it early by having a proactive conversation, not when they're 90 days late.

Finally, make client credit review a standing item in your monthly management meetings. Look at your upcoming project pipeline and decide which potential clients need assessing. Review the payment performance of current clients. This regular focus ensures credit management becomes part of your agency's culture, not an afterthought. To understand how your agency's financial health stacks up across credit management and other key areas, take the Agency Profit Score — a free 5-minute assessment that gives you a personalised report on Profit Visibility, Revenue & Pipeline, Cash Flow, Operations, and AI Readiness.

Implementing a disciplined branding agency client credit assessment process is one of the fastest ways to improve your financial stability. It moves you from a reactive position of chasing bad debt to a proactive position of choosing financially secure partnerships. This lets your team focus on what they do best: creating powerful brands that drive business success.