During the client onboarding process, there are many things for professional services firms to consider, ensuring that their processes are compliant and that their new client does not pose a risk to the business in terms of their validity and financial stability.
One such aspect of this process is a credit check. The primary reason for conducting credit checks is to protect the firm against financial risk.
By assessing a potential client’s creditworthiness, firms can gauge the likelihood of late or missed payments, which can significantly impact cash flow and profitability.
Credit checks provide a measure of a client’s financial stability, enabling firms to make informed decisions about whether to onboard a client or negotiate different payment terms.
Regulatory compliance
For many professional services firms, particularly in the financial and legal sectors, regulatory compliance is a key concern.
Regulations such as the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 require firms to conduct due diligence on their clients.
This includes assessing the risk of financial crime, which can be partly achieved through credit checks.
Failing to comply with these regulations can result in hefty fines and reputational damage.
Improved client relationships
Credit checks can also enhance client relationships. By understanding a client’s financial situation from the outset, firms can make sure that their services and payment terms suit the client’s needs. This can lead to improved client satisfaction and loyalty.
By identifying potential financial issues early, firms can address these issues with the client, preventing unwelcome surprises and disputes down the line.
Client onboarding software
Client onboarding software can streamline the process of conducting credit checks. These platforms can automate the credit check process, pulling data from various credit agencies and presenting it in a simple format.
This not only saves time but also reduces the risk of human error.
Credit checks play a vital role in the client onboarding process for professional services firms. They help alleviate the risk of financial issues, ensure regulatory compliance, and strengthen client relationships.
Summa Tech’s client onboarding software enables firms to conduct credit checks more efficiently and effectively, leading to a smoother onboarding process and ultimately, more successful client relationships.
If you’d like to know more about how our client onboarding tool can benefit your firm, please contact us today.