• Finance, Advice

Wondering if a client will pay? How a former CIA analyst sizes up new clients

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You’re about to land a prospective client. It’s interesting work and the money is good. Before you choose to accept this assignment, consider: Will you eventually need to “follow up” on the invoices for this work? Is there a chance they could totally stiff you?

In a Freelancers Union study, 71% of independent workers reported experiencing late or non-payment of an invoice at some point in their career. Longstanding relationships can go sour, but new clients pose a greater payment risk—one that you want to assess upfront.

So how do you identify risky clients–before they leave you in the lurch?

During my career at the Central Intelligence Agency, I used a variety of structured analytic techniques to determine the intent of an action. For example, I once had an assignment to monitor troop movements in an adversarial country: Were gathering military forces getting ready to invade their neighbor or just engaging in regular training maneuvers?

I frequently had to make calls based on information that could have many meanings. Using a structured analytic framework helped me guard against typical cognitive biases such as:

  • Mirror imaging—assuming that others act based on the same motivations as you
  • "Best guess" or "this is what happened last time, so it will happen this time" bias
  • Confirmation bias—only looking at evidence that supports the conclusion you want to draw

In my own career trajectory, the structured tools from intelligence work readily translated to risk management in financial services. Likewise, they can apply to many other professional situations involving ambiguous data–including identifying nonpaying clients.Here’s how structured analytical techniques work:

Actions speak louder than words

A deceptive or dishonest client may reveal their intentions via their behavior. This can be anything from setting a short deadline to offering significantly higher pay than the industry norm, both of which can be used to create a sense of urgency that pressures you into submitting work without the protection of a written agreement.

Behavioral clues are powerful. If you are unsure of what counts as normal behavior—even experienced freelancers find themselves in new predicaments—ask your peers. Attending Freelancers Union’s monthly SPARK events is a great way to meet other professionals in similar fields, who can serve as a sounding board.

Context clues

Consider the details surrounding the offer. Evaluate how the client found you. For example, a referral from a mutual contact, such as a friend or former client, offers you an additional data point.

Inquiring about the client’s motivations can also help you assess their reliability. Can they articulate what it was about your portfolio, style, or prior experience that attracted them?

A thoughtful answer—or the lack thereof—will likely tell you something.

Known unknowns

Examine the contact and business details of your potential client. How established are they? A client with a scant online profile may pose a higher risk.

Most of us will at least Google the name of the client to find their website or social media presence, but you may uncover additional data points by also searching for results on their phone number and email address. To further confirm the legitimacy of the client, check their registration status with the relevant state business license office.

Assess your risk threshold

A client might fall short on one of these variables, but that doesn’t mean you need to turn them away immediately. Step back and look at the whole picture. Does it add up? And what is your risk threshold if the client doesn’t come through?

Are you really stoked about this project? How much of a financial buffer do you have? Would the project provide a chance to gain experience in a new area? What’s the full cost of taking on the work—from additional childcare expenses to forgoing other professional opportunities?

Make your decision

This framework can help you distinguish between clients who are safer bets and those who are not worth the risk. Perhaps more useful, it can help you gauge and navigate that gray zone. You may be able to mitigate the risk by negotiating for additional protections, such as partial payment up front, with clients who seem iffy but worth the chance.

Call it “due diligence,” a widely used professional term. Or call it “my-pay-is-due diligence.”

Using analytic structure techniques to vet a new client can protect your time, work, and energy.

Rita Crague is Head of Compliance and Risk at Joust. As a former CIA intelligence officer, Rita applies her critical thinking and security expertise to Joust’s data analytics and risk management programs.

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