Why PR agencies should evaluate clients for payment risk before campaigns

Key takeaways

• Conducting a PR agency client credit assessment before signing a contract is a non-negotiable step to protect your cash flow and profitability.
• Use a simple client evaluation checklist to quickly identify red flags like unclear budgets, poor payment histories, or unrealistic expectations.
• Implementing prepayment agreements, especially for new or high-risk clients, is the most effective way to de-risk your project cash flow.
• Risk scoring tools can help you standardise your assessment process and make objective, data-driven decisions about which clients to take on.

What is a PR agency client credit assessment?

A PR agency client credit assessment is the process of checking a potential client's ability and likelihood to pay you on time, before you agree to do any work. It's like a background check on their financial health and payment habits. For PR agencies, this means looking beyond the exciting campaign brief to understand if the client relationship will be profitable and stress-free, or a source of bad debt and cash flow headaches.

Many agencies skip this step because they're eager to win the work. But the most profitable PR agencies treat client selection as a financial decision, not just a creative one. They know that a client who pays late or doesn't pay at all can wipe out the margin from an entire campaign. A proper assessment helps you spot these risks early.

Think of it as due diligence. You wouldn't hire a key employee without checking their references. You shouldn't take on a significant client without understanding their payment risk. This process protects the time, money, and effort your team will invest in delivering great PR results.

Why do PR agencies specifically need to assess client payment risk?

PR agencies need to assess client payment risk because their business model is uniquely vulnerable to late or non-payment. Unlike product-based businesses, you sell time and expertise. Once that time is spent on strategy, media outreach, or content creation, you can't get it back if the client doesn't pay. Your main costs are your team's salaries, which are fixed and must be paid regardless of client payment status.

PR work often involves upfront effort with payment coming later. You might spend weeks on campaign planning and pitching before an invoice is even issued. If the client then delays payment for 60 or 90 days, you're funding their campaign with your own cash flow. This strain can prevent you from paying your team, investing in growth, or taking on other good clients.

Furthermore, the value of PR can sometimes be subjective in a client's eyes. If a campaign doesn't generate the exact coverage they imagined, they might use that as a reason to dispute or delay payment, even if you delivered the agreed work. Assessing a client's understanding of PR outcomes and their general business professionalism is a key part of the credit assessment.

How can a simple client evaluation checklist save your agency?

A client evaluation checklist is a quick, standardised list of questions and checks you perform on every potential client. It turns a vague feeling of risk into a clear, actionable score. This checklist helps you avoid emotional decisions and makes your business development process more professional and financially sound.

Your checklist should cover three main areas: the client's business stability, their payment history and terms, and the project's commercial setup. For business stability, check how long they've been operating, look at their recent news or financial filings if available, and assess the clarity of their budget. For payment history, ask for trade references or check their payment performance with previous suppliers if possible.

For the commercial setup, the checklist should force clarity on payment terms, invoicing schedules, and approval processes. A huge red flag is a client who is vague about budgets, hesitant to agree to standard payment terms, or has a history of frequent scope changes with other agencies. Using this checklist consistently means you'll spot problematic clients before you sign a contract, not after you've chased an overdue invoice for three months.

What are the most effective risk scoring tools for agencies?

Risk scoring tools are systems or frameworks that help you assign a numerical score to a client's payment risk, making your assessment objective and consistent. You don't always need expensive software. A simple spreadsheet scoring system you build yourself can be a highly effective risk scoring tool for a growing PR agency.

Create a scorecard with different risk factors. Assign points to each factor based on its importance. For example, a client who agrees to a 50% prepayment might score 10 points (low risk). A client who insists on net 90 payment terms might score 1 point (high risk). Other factors include their company's age, the presence of a clear contract, their responsiveness during the sales process, and the size of their budget relative to their company size.

More advanced tools include commercial credit check services from companies like Creditsafe or Experian. These provide a credit score and report on a company's financial health and payment history. For larger retainers or campaign fees, this small upfront cost is a wise investment. The goal of any risk scoring tool is to give you a clear, repeatable process. It takes the guesswork out of client selection and helps your whole team make better commercial decisions.

When should you insist on prepayment agreements?

You should insist on prepayment agreements in several key scenarios to protect your agency's cash flow. The most common situation is with all new clients. A standard prepayment agreement, such as 50% of the project fee upfront before work begins, aligns your cash inflow with your effort. It shows the client is serious and has the funds available, and it funds the initial phase of the work.

Prepayment agreements are also essential for any project-based work (as opposed to monthly retainers). They prevent you from carrying 100% of the cost and risk until the project is complete. For retainers, consider a first-month-in-advance payment model, which is common and accepted in the industry. This gets cash in the door before your team starts the clock.

You should also use prepayments for any client your risk assessment flags as higher risk. This could be a startup with limited trading history, a client in a volatile industry, or one with less-than-ideal payment terms. A prepayment agreement is your financial safety net. It significantly reduces your exposure if payment issues arise later. Specialist accountants for PR agencies often advise that strong payment terms are a sign of a professionally run agency and rarely deter good, serious clients.

What does a bad client risk look like for a PR agency?

A bad client risk for a PR agency often shows up as a combination of financial red flags and operational headaches. Financially, they might be a new company with no credit history, an established company that is slow to pay all its suppliers, or an organisation that is vague or secretive about its budget. They may push back aggressively on your standard payment terms and try to negotiate extended periods like 60 or 90 days.

Operationally, bad risks are clients with unclear goals, constantly shifting expectations, or a history of micromanaging agencies. They might see PR as a magic bullet for deeper business problems. A major warning sign is a client who focuses only on cost and not on value or outcomes. They will grind you down on price but expect world-class service, squeezing your margin to nothing.

Another classic bad risk is the client who wants you to start "immediately" but can't get a contract or purchase order sorted for weeks. This urgency without process often leads to scope creep and payment disputes. Recognising these patterns is a skill. Using your client evaluation checklist helps you spot them consistently, so you can politely decline or structure the engagement with very strong financial protections like prepayment agreements.

How do you build a client evaluation checklist for your PR agency?

To build your client evaluation checklist, start by listing every problem you've had with a client that led to late payment, scope disputes, or excessive unpaid admin time. Turn these problems into screening questions. Your checklist should have sections for Company Background, Financial Signals, and Project Specifics.

In the Company Background section, include questions like: How long has the company been trading? Can we find positive independent news about them? Who are their current competitors? In the Financial Signals section, ask: What are their requested payment terms? Are they willing to provide bank or trade references? Is their budget approved and clear?

In the Project Specifics section, clarify: Who is the single point of contact for approvals and invoices? What is the defined scope of work and success metrics? What is the process for scope changes? Keep the checklist to one page. The goal is to gather this information naturally during your sales conversations, not to send a daunting form. To understand how your agency's financial health stacks up against these planning principles, try the Agency Profit Score — a quick 5-minute assessment that reveals where you stand on cash flow, revenue visibility, and operational efficiency.

What are the real costs of skipping client credit assessments?

The real costs of skipping client credit assessments are much higher than just one unpaid invoice. The direct cost is the lost revenue and the hard cost of the team time spent on the campaign, which directly hits your gross margin. But the indirect costs are often more damaging to your agency's health.

Indirect costs include the management time spent chasing payments, which is unbillable and stressful. They include the opportunity cost of turning away other good clients because your team was tied up on a non-paying project. There's also the morale cost when your team works hard on a campaign only to see the agency struggle to get paid for it. This can lead to burnout and turnover.

Persistently poor cash flow from bad debt can stop you from investing in growth, hiring key staff, or upgrading your tools. It can force you to take on any client out of desperation, creating a vicious cycle. According to a report by Creditsafe, late payment is a leading cause of cash flow problems for small businesses. For a service business like a PR agency, proactive assessment is your first line of defence.

How can better client assessment improve your agency's profitability?

Better client assessment improves profitability by ensuring you work with clients who value your service and pay reliably, which increases your effective hourly rate and reduces non-billable admin time. When you filter out problematic clients, you free up your team to do more billable, strategic work for good clients. This improves your team's utilisation rate (the percentage of their time spent on revenue-generating work).

It also reduces your bad debt provision, which is money you have to set aside in your accounts for invoices you don't expect to collect. Less bad debt means more of your billed revenue turns into actual cash profit. Furthermore, good clients are more likely to agree to fair pricing, pay on time, and provide repeat business and referrals. This lowers your client acquisition cost and increases lifetime value.

In short, selective client acquisition based on a solid PR agency client credit assessment is a profit multiplier. It allows you to run a leaner, more focused, and more financially stable business. You spend less on business development and client management overhead, and more on delivering great work that retains good clients. This is a core part of a sustainable agency growth strategy.

What's the first step to implementing this process today?

The first step is to create your basic client evaluation checklist. Don't aim for perfection. Take 30 minutes to write down the top five warning signs from past difficult clients. Turn those into questions you can ask in your next sales discovery call. For example, if scope creep was a problem, add a question: "Can you walk me through your process for approving additional work outside our agreed scope?"

Next, standardise your payment terms. Decide what your ideal terms are (e.g., 50% upfront for projects, first month in advance for retainers, net 14 or net 30 for invoices). Put these terms in your proposal as standard, not as a starting point for negotiation. Finally, commit to running this mini-assessment for every single new client opportunity, no matter how exciting the project seems.

This isn't about being cynical. It's about being professional and protecting the business that supports your team and your other clients. Getting this right transforms your agency's financial resilience. If you want to discuss how to build these financial controls into your operations, our team of specialist PR agency accountants can provide tailored advice.