Why performance marketing agencies must assess partner creditworthiness

Key takeaways

• Client credit assessment is a core commercial skill, not just admin. It directly protects your agency's cash flow and profitability by filtering out high-risk clients before they become a problem.
• Use a structured client evaluation checklist for every new prospect. This should cover company financials, payment history, contract terms, and the person you're dealing with.
• Risk scoring tools provide objective data to back up your gut feeling. They help you standardise decisions and avoid taking on emotionally appealing but financially risky clients.
• Prepayment agreements are your strongest financial defence. For new clients, uncertain industries, or large ad spend commitments, getting money upfront is standard practice for secure agencies.
• Your client portfolio quality dictates your financial health. A few bad payers can destroy the margin from your best clients, making rigorous assessment essential for sustainable growth.

What is a performance marketing agency client credit assessment?

A performance marketing agency client credit assessment is the process of checking if a potential client can and will pay you on time. It's about understanding their financial health and payment behaviour before you start work. This isn't just a credit check. It's looking at their business model, their industry risks, and the specific person you'll be working with.

For performance agencies, this is especially critical. You often commit to spending client money on ads before you get paid. If a client doesn't pay, you're not just out your fee. You could be personally liable for thousands in media spend. A proper assessment helps you avoid this trap.

Think of it like a pilot checking the weather before takeoff. You wouldn't fly into a storm without planning. Don't take on a client without knowing their financial forecast.

Why do performance marketing agencies often skip client credit checks?

Most agencies skip checks because they're focused on winning the work, not on the risk of not getting paid. The sales process is exciting. The finance process feels boring. But this is a dangerous mistake. The excitement of a new client win fades fast when their invoice is 90 days late.

In our experience, agencies avoid checks for three main reasons. First, they worry it looks unprofessional or distrustful to ask for financial references. Second, they don't have a simple process to follow. Third, they're scared of losing the deal if they ask too many questions.

The reality is the opposite. Professional clients expect you to do your due diligence. Having a clear process shows you're a serious business partner. It actually builds trust. Specialist accountants for performance marketing agencies see this pattern all the time. The agencies that check clients thoroughly have fewer cash flow crises and higher profits.

How does poor client assessment hurt your agency's cash flow?

Poor assessment hurts you in two ways: direct bad debt and hidden operational cost. Direct bad debt is the invoice that never gets paid. For a performance agency, this can include unpaid ad spend you advanced, which doubles the loss.

Hidden cost is the time and stress of chasing payments. Your account managers spend hours on emails and calls instead of optimising campaigns. This drags down your team's utilisation rate (the percentage of their time you can bill for). It also damages team morale.

Let's say you have a client with a £10,000 monthly retainer. If they pay 60 days late, every month, you're effectively giving them a £20,000 interest-free loan. That's cash you can't use to pay your team, invest in tools, or grow. One bad client can tie up enough cash to stall your growth.

What should be on your client evaluation checklist?

Your client evaluation checklist is a standard set of questions you ask before signing a contract. It turns a vague feeling about a client into clear, actionable data. A good checklist covers four areas: the company, the finances, the contract, and the people.

For the company, check their legal entity name on Companies House. See how long they've been trading. Look at their industry. Some sectors, like startups or direct-to-consumer brands, have higher failure rates. This doesn't mean you never work with them. It means you need stronger payment terms.

For finances, ask for trade references. These are other suppliers they pay. Call them. Ask about typical payment times. Check their payment policy. Do they pay on 30 days, or do they routinely stretch to 90? You can also use a commercial credit report from a provider like Creditsafe or Experian for a fee. This gives a risk score and financial summary.

For the contract, be crystal clear on payment terms. Net 30 is standard, but net 15 is better for your cash flow. Define what happens with ad spend. The best practice is for the client to fund the ad account directly. If you must spend on their behalf, get a prepayment for the estimated monthly spend plus your fees.

For the people, assess your main contact. Do they have budget authority? Are they organised? A disorganised client contact often leads to delayed approvals, which leads to delayed campaigns, which leads to delayed invoices. Good communication is a financial asset.

How can risk scoring tools make your assessment objective?

Risk scoring tools give you a number or rating for a client's financial health. They use data from Companies House, payment history with other suppliers, and industry trends. This data helps you make a fact-based decision, not just a gut feeling.

These tools automate the basic checks. You type in a company name, and you get a report. It shows things like their credit limit, any county court judgments (CCJs) against them, and how their payment performance compares to industry averages. This takes minutes instead of hours.

Using risk scoring tools creates consistency. Every new client gets the same level of scrutiny. This stops you from making exceptions for a charismatic founder or a exciting project. The tool has no emotions. It just shows the risk. You can then decide if the commercial reward is worth that risk, and what terms (like prepayment) you need to mitigate it.

For example, a tool might flag a client as "high risk" due to slow payment history. You don't automatically reject them. Instead, you propose a prepayment agreement for the first three months. If they pay on time, you can relax the terms. This protects you while giving the client a chance to prove their reliability.

When should you insist on prepayment agreements?

You should insist on prepayment agreements in three key situations: with all new clients, with clients in volatile industries, and for any project involving significant upfront ad spend. Prepayment is not a sign of distrust. It's standard commercial practice for managing risk.

For a new client, a common structure is to take payment for the first month's retainer and estimated ad spend upfront before any work begins. This proves commitment on both sides. It also ensures you aren't funding their marketing launch out of your own pocket.

For clients in high-risk sectors, like crypto or many D2C brands, prepayment is essential. Their cash flow can be unpredictable. Getting paid in advance removes the risk of them running out of money before paying your invoice. You can transition to monthly invoicing after a proven track record of timely payments, say 6 months.

For large campaign launches, never commit client funds without the money in your account. If a client wants you to book £50,000 in media for a product launch, that £50,000 should be in your client account before you place the order. Your contract should state this clearly. This protects you from being left with a huge bill if the client changes their mind or goes bust.

What are the red flags in a client's financial behaviour?

Red flags are warning signs that a client might be a payment problem. Spotting them early lets you adjust your terms or walk away. The biggest red flag is reluctance to provide basic information. A legitimate business understands why you need to check them.

Other financial red flags include a history of changing accountants frequently, which can indicate disputes over financial reporting. Be wary if the company's directors have been involved with other companies that failed with debts. You can check this on Companies House for free.

Payment habit red flags are crucial. If they boast about squeezing their suppliers for long payment terms, they'll do the same to you. If they ask for a heavily discounted rate upfront, it can signal cash flow problems. Watch for disorganisation in the onboarding process. A client who is slow to sign contracts, provide logins, or give briefs will almost certainly be slow to pay invoices.

Industry-specific red flags for performance marketers include clients who want to "move fast" and bypass your standard processes. They often want you to spend on ads before contracts are signed. This is a major risk. Always follow your process. The right clients will respect it.

How do you balance risk assessment with winning new business?

You balance risk by making assessment a seamless part of your sales process, not a barrier at the end. Frame it as professional due diligence that benefits both parties. Explain that stable client relationships are built on clear financial foundations.

Introduce your terms early. Mention your standard payment terms and prepayment policy in initial proposals. This sets expectations. If a client pushes back, it's better to know before you've invested time in a detailed pitch.

Use a tiered approach. Not all clients need the same level of scrutiny. A large, established corporate with a public track record might need less checking than a new startup. To understand how different client types could affect your agency's financial health, take the Agency Profit Score — a free 5-minute assessment that reveals your strengths and gaps across profit visibility, cash flow, revenue pipelines, and more.

Remember, saying no to a bad client is as valuable as saying yes to a good one. A problematic client consumes disproportionate management time, hurts team morale, and risks your cash flow. The opportunity cost of working with them is missing out on a better, more professional client. Your goal is a portfolio of quality clients, not just a large number of clients.

How should you review existing clients' creditworthiness?

You should review existing clients at least once a year, or if their payment behaviour changes. Client circumstances change. A once-reliable payer can start slipping if their own business hits trouble. Regular reviews help you spot issues early.

Monitor their payment times. Are invoices taking longer to pay? Are they asking for extensions? This is often the first sign of stress. Use your accounting software to track the average days it takes each client to pay.

Keep an eye on their business. Read their news. If they're laying off staff or missing growth targets, their marketing budget might be next. Have an open conversation. You can frame it as a business review. Ask how the year is going for them and if they foresee any changes to their marketing plans.

If an existing client's risk increases, you can adjust terms. You might reduce their credit limit (the amount you're willing to be owed at any time). For example, if they were on net 60 terms, you might move them to net 30. Or you might request partial prepayment for large upcoming ad buys. It's easier to adjust terms with an existing client than to chase bad debt.

What legal and contractual safeguards should you have?

Your contract is your last line of defence. It must be clear, strong, and signed before any work starts. The key clauses for credit risk cover payment terms, interest on late payments, ownership of work, and liability for ad spend.

Your payment terms should state the exact number of days for payment (e.g., "Payment is due within 14 days of the invoice date"). Include a clause for statutory interest on late payments under the Late Payment of Commercial Debts (Interest) Act 1998. This gives you a legal right to charge interest, which encourages on-time payment.

Crucially, state that you own all work (strategies, creatives, reports) until full payment is received. This gives you leverage if a client refuses to pay. For ad spend, the contract must state that the client is liable for all media costs you incur on their behalf. Even better, structure it so you are an agent, and they are the direct contract holder with the media platform.

Include a right to suspend services. If a client is late on payment, you should have the right to pause all work, including pausing their ad campaigns, until the account is brought current. This protects you from doing more work for a client who isn't paying for the last batch. Always get professional legal advice to draft or review your client contracts.

Building a rigorous performance marketing agency client credit assessment process is a competitive advantage. It filters for better clients, ensures predictable cash flow, and lets your team focus on delivering great results instead of chasing payments. The most sustainable agencies are those that choose their clients as carefully as their clients choose them.

If the financial risks of client non-payment keep you awake at night, it's time to systemise your approach. Getting specialist support from accountants who understand the unique cash flow pressures of performance marketing can help you build these safeguards. Discover where your agency stands financially with our free Agency Profit Score — answer 20 quick questions and get a personalised report on your profit visibility, cash flow health, revenue pipeline, operations efficiency, and AI readiness.