It may seem a simple point but it is surprising how few businesses really get to know their customers and clients before they enter into contracts with them. If I was to give one piece of New Year advice to a client it is to make sure they ask new customers and clients their full legal name and whether they are a sole trader, partnership or a limited company before they quote for new work.
As business is often done over the telephone or by email it can be easy to think of the person you are speaking to as the person you are doing business with. It might be obvious from the outset that a limited company has contacted you for a quote but that might not always be the case and if there was a later problem with you getting paid by that customer do you know who you are dealing with?
I see lots of small businesses who are so focused on winning the work and making a good impression they forget to ask this simple question. Unless you are being paid up front or are dealing with the public you really need to know who you are trusting with your time and resources. It can make it difficult to recover payment of unpaid invoices if you do not know who you are chasing. You might also find that the person or company you have traded with is heavily in debt.
By identifying from the outset whether it is an individual trading as a sole trader or a limited company you can carry out credit checks and background searches to find out the financial stability of the person or company you are giving credit to. If you are being asked to carry a large overhead or waiting a lengthy period of time before getting paid on an extended line of credit you need to feel comfortable that you can trust that you will be eventually paid.
Knowing this information before you enter legal relations with your client or customer means you can stipulate the terms upon which you are willing to trade with them. That might mean reduced payment terms, securing the cost of materials upfront or asking for director guarantees.