Protecting yourself if a client’s business goes under

This is the kind of topic where you might prefer to stick your head in the sand. But the reality is that business insolvencies are close to their highest level in the UK since 2009. And there are no guarantees it won’t be one of your clients that goes under next. So how can you protect yourself?

First up, let’s get real about the numbers because we don’t want to exaggerate the risks. According to the Office for National Statistics (the ONS), one in 197 active UK companies entered insolvent liquidation in the financial year 2022/23.

Insolvent liquidation is the process of closing a company that cannot pay its debts. And one in 197 is the equivalent of 0.51% of businesses going under over the course of 12 months.

So we’re not looking at particularly scary levels of insolvency, but it’s still quite a few more businesses than in 2021/22, when the figure was 0.39%.

So how can you protect yourself and your business from being left in the lurch by a client who can no longer pay?

Prevention is better than cure

Ideally, before you start working with a new client you’d do your due diligence and check for signs that their business is healthy. Luckily, if you’re insured through With Jack, we can help you with that. Before you onboard a new, UK-based client, let us know and we can create a custom report so you can make an informed decision about working with them.

If you’re not a With Jack customer, then you’ll want to at least do basic checks like making sure your client has a registered company with a registered address and is clearly who they say they are. You might also check on the Companies House website that they’ve been submitting mandatory documents on time. This applies to UK limited companies – there are other websites you need to check if you work with global companies or other types of organisations.

You might also Google a potential client to check that nothing out of the ordinary comes up. For a project that’s worth thousands of pounds to you or your business, you could look at hiring a due diligence consultant to check out a company for you. But for smaller projects, that’s almost certainly overkill.

There are other subtle signs you might want to be aware of. For example, if a company isn’t keen to pay a deposit or make staged payments during the project, or if they insist on 30 or 60 days’ payment terms in an industry where that’s not the norm, those could be red flags that demonstrate an underlying issue.

Mitigating the risk of your client going under

If you’re already insured through With Jack, you won’t be covered for client insolvency, but you may want to consider taking out separate insurance for this. The insurance you need is called trade credit insurance, and the company I recommend to With Jack customers is Nimbla.

The way it works is that you can cover one individual invoice that’s worrying you, cover a number of invoices, or cover everything for an entire year. This kind of insurance can help you take on larger projects without worrying about being left seriously out of pocket if payment is very late or not made at all.

With three out of five UK businesses waiting on late payments, this kind of insurance can give you the confidence to take on work that might feel risky without a safety net in place.

Plenty of small businesses and freelancers don’t want or need this insurance though. So what happens if you don’t have this insurance and your client starts to show signs that they’re struggling?

Act fast, ahead of insolvency

Firstly, if there are warning signs of difficulties, such as the business laying off staff, then you might want to see if your client will agree to an interim or staged payment to be made for work done to date. Chances are the company won’t go under. But if you have a good relationship with your contact at the company then they should understand your concerns and do what they can to put your mind at rest and make sure you’re paid for your work.

You might also want to prioritise wrapping up that client’s project so you can put your final invoice in as quickly as possible.

What to do if your client does go under

At this point, make sure you’ve invoiced the client for your work, and keep an eye out for communications from the liquidator or insolvency practitioner. The liquidator will sell the company’s assets and use the proceeds to pay creditors (you are now a creditor). Your invoice won’t be paid in full, but you may get a partial payment. However, you must respond to the letter telling you what to do to recover some of the money you’re owed.

At With Jack we’re aware of a few customers who’ve read the letter too late and missed the window of opportunity. This letter is part of the official process of insolvency, and you need to respond quickly with the information requested, or you’ll miss out.

Guiding you through the insolvency process

If you have legal expenses insurance, then you can use the legal advice helpline to get guidance on the insolvency process. This will make sure you’re clear on what to expect and you can have the relevant information ready for the liquidators.

Ultimately, it’s unlikely you’ll face these challenges, but with tens of thousands of UK businesses facing liquidation every year, it makes sense to set yourself up to avoid shaky businesses, to know the risks and how to mitigate them, and to keep yourself well-informed about the insolvency process.

If you have questions about any of this, please do get in touch via

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