Why email marketing agencies should screen clients for payment history

Key takeaways

• Client credit assessment is a financial filter, not just admin. It directly protects your agency's cash flow by identifying clients likely to pay late or not at all before you start work.
• Use a simple client evaluation checklist at the proposal stage. This should include checking Companies House for financial health, asking for trade references, and reviewing their payment terms history.
• Implement tiered payment terms based on risk. Low-risk clients might get standard 30-day terms, while higher-risk prospects should be offered prepayment agreements or shorter payment cycles.
• Bad debt destroys email agency margins. One unpaid invoice for a large campaign can wipe out the profit from several well-paying clients, making proactive screening essential.

What is client credit assessment for an email marketing 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. For an email marketing agency, this means looking at how likely they are to pay your invoices on time. It's about protecting your cash flow, which is the money moving in and out of your business each month.

Think of it like a background check for your agency's finances. You wouldn't hire a key employee without checking their references. In the same way, you shouldn't take on a major client without understanding their financial behaviour. This process is a core part of commercial strategy for any serious email marketing agency.

A proper email marketing agency client credit assessment helps you avoid the clients who cause 80% of your financial headaches. It turns a reactive problem of chasing late payments into a proactive system for selecting better business partners.

Why is checking payment history so critical for email agencies?

Email marketing agencies have unique cash flow pressures that make client credit assessment essential. Your costs for platform fees, specialist copywriters, and designers are often due upfront or monthly. If a client pays you 60 or 90 days late, you're funding their marketing out of your own pocket.

Your service delivery model creates risk. You might build a complex automation workflow or a multi-channel campaign before the first invoice is even due. If the client then disputes the invoice or pays late, you've already spent the money on salaries and software. The financial exposure for an email marketing agency can be significant.

Consider the impact on your gross margin, which is the money left after paying your direct team and costs. An industry benchmark for a healthy agency gross margin is 50-60%. If a £10,000 invoice goes unpaid, you need to generate £20,000 of new revenue just to cover that loss, assuming a 50% margin. That's why a robust email marketing agency client credit assessment isn't optional, it's a financial survival tool.

How do you start a basic client credit check?

Begin with publicly available information before you even send a proposal. In the UK, the first stop for a limited company is Companies House. You can view their filed accounts, see how long they've been trading, and check for any red flags like consistently late filing.

Look at their profit and loss history and their balance sheet strength. Are they making a profit? Do they have healthy reserves, or are they heavily reliant on debt? A company with thin margins or high debt might be a higher credit risk for your email marketing agency.

Next, do a simple web search. Look for news articles, reviews, or forum discussions about the company. Are there complaints about them not paying suppliers? This informal research is a free and effective part of your initial client evaluation checklist.

Finally, just ask. During your sales conversations, inquire about their standard payment processes. You can frame it positively: "To ensure we can align our processes, could you tell me about your accounts payable workflow and typical payment terms?" Their answer, and their comfort in giving it, is very telling.

What should be on your client evaluation checklist?

Your client evaluation checklist is a practical tool to standardise your assessment. It ensures you don't miss key steps in the excitement of winning a new client. A good checklist for an email marketing agency should cover four areas: company background, financial signals, contract terms, and your gut feeling.

For company background, note their legal structure (limited company, sole trader, PLC), years trading, and industry. A startup in a volatile sector is a different risk profile than an established professional services firm. Include checking for County Court Judgments (CCJs) or insolvency notices.

Financial signals include their requested payment terms. A client asking for 90-day terms upfront is a warning sign. Also note their company size relative to the project budget. Is this a huge project for them? If so, budget overruns or internal approval delays become more likely.

Contract terms are your leverage. Your checklist should prompt you to confirm your payment terms are clearly stated, include late payment interest as per UK law, and define what happens if the project is paused or cancelled. Specialist accountants for email marketing agencies can help you draft solid terms.

Finally, trust your instincts. Does something feel off in communications? Are they avoiding direct answers about budget or process? Add a simple "Professional feel / communication style" rating to your checklist. If multiple amber or red flags appear, it's time to dig deeper or walk away.

When should you use risk scoring tools?

Use risk scoring tools when you're dealing with larger contracts, new clients you have no prior relationship with, or clients in industries known for cash flow challenges. These tools automate and quantify the assessment, giving you a data-driven score to inform your decision.

Risk scoring tools pull data from various sources, including credit reference agencies, Companies House, and electoral roll data. They generate a score that indicates the likelihood of a business becoming insolvent or paying severely late. This provides an objective layer to your email marketing agency client credit assessment.

For example, a tool might flag a client with a suddenly deteriorating payment performance to their other suppliers, even if their filed accounts still look okay. This early warning is invaluable. It allows you to adjust your terms, perhaps by requiring a deposit or milestone payments, before any money is at risk.

These tools are especially useful as you scale. When you're handling dozens of client inquiries a month, manually checking each one isn't feasible. Integrating a risk scoring tool into your CRM or proposal workflow saves time and creates consistency. It ensures your junior team members can make safe commercial decisions based on clear guidelines.

How do prepayment agreements protect your agency?

Prepayment agreements require the client to pay for some or all of the service before work begins. For an email marketing agency, this is the strongest defence against bad debt. It aligns the cash flow, so you're not using your money to fund their marketing activity.

The most common form is an upfront deposit, often 50% of the project fee or the first month's retainer. This is standard for new clients, large one-off projects like a full CRM migration, or clients who score as a medium risk in your assessment. It demonstrates serious commitment from the client.

Another model is payment in advance for retainers. Instead of billing at the end of the month for work done, you bill at the start of the month for work to be done. This is common practice among savvy email marketing agencies. It completely removes the credit risk and dramatically improves your cash flow forecasting.

Prepayment agreements also act as a quality filter. Clients who are serious about the partnership and financially stable will rarely object to standard prepayment terms. Clients who push back aggressively on any form of upfront payment are often signalling cash flow problems of their own. Making prepayment agreements your standard policy is a powerful outcome of a disciplined email marketing agency client credit assessment process.

What are the real costs of skipping client credit checks?

The costs are both direct and hidden. The direct cost is the unpaid invoice itself. For an email marketing agency, this isn't just lost revenue, it's lost profit. You've already incurred the costs of delivery, like platform fees, designer time, and copywriting.

The hidden costs are often larger. Time spent chasing payments is time not spent on business development or servicing good clients. According to a report highlighted by Small Business, UK SMEs spend billions of hours annually chasing late payments. This administrative drain hurts your agency's growth.

There's also the emotional and relationship cost. Chasing money strains the client relationship, making it hard to deliver great work. It can demoralise your team, who see their hard work being undervalued. This cultural impact can be significant.

Finally, there's the opportunity cost. The time, energy, and financial bandwidth tied up with a problematic client could have been used to service a good client or win a better one. By not conducting a proper email marketing agency client credit assessment, you're not just risking a loss, you're potentially missing out on greater gains.

How do you handle a client with a poor payment history?

If your assessment reveals a poor payment history, you don't necessarily have to reject the client outright. Instead, you adjust your commercial terms to match the higher risk. This turns a potential problem into a controlled, profitable engagement.

The first step is to have an open conversation. Present your findings neutrally. You could say, "Our standard terms are 30 days, but we note some of your supplier payments run to 60+ days. To work together, we'd need to structure payments differently to protect both our businesses." This frames it as a mutual solution.

Then, offer tiered options. For a moderate risk, you might propose a 50% deposit with the remainder due on delivery. For a higher risk, propose 100% payment upfront for the first project or a quarterly retainer paid in advance. To understand how different payment terms affect your agency's financial health, try the Agency Profit Score — a free 5-minute assessment that reveals your cash flow position and helps you make informed decisions about payment structures.

Be prepared to walk away. If a client refuses all reasonable risk-mitigating terms, they are telling you they expect you to act as their bank. Your capital is better deployed serving clients who value a professional partnership. Sticking to your process is what separates a commercially savvy email marketing agency from one that lurches from one cash crisis to the next.

How can you build assessment into your sales process?

Integrate credit assessment seamlessly so it feels like a natural part of onboarding, not an interrogation. The goal is to gather necessary information while building trust and demonstrating professionalism.

Start early. Include a section in your initial proposal document that clearly states your standard payment terms. This sets expectations before any negotiation begins. Mention that you conduct a standard commercial review for all new clients, which is standard practice for professional service firms.

Use technology. Many CRM systems allow you to add fields to capture company number, requested payment terms, and other key data. You can even use lightweight risk scoring tools that plug into your workflow and provide an instant rating when a company name is entered.

Make it a team responsibility. Your account managers or sales leads should own the initial checklist. Your finance team or external accountants can handle the deeper financial analysis for larger deals. This spreads the workload and embeds a commercial mindset across your agency.

Finally, review and refine. Every quarter, look at which clients paid on time and which didn't. Compare their profiles against your original assessment. Did your client evaluation checklist predict the outcome? Use this real data to improve your questions and scoring system. This turns your email marketing agency client credit assessment into a learning machine that gets smarter over time.

Implementing a systematic approach to client credit assessment transforms your agency's financial resilience. It allows you to focus your energy on delivering exceptional email marketing for clients who value and pay for your expertise. For tailored advice on building robust financial processes, consider speaking with specialists who understand your model.