Comprehensive checklist to help you vet clients for reliability and on-time payments, including physical verification (factories/offices):
1. Pre-Engagement Checks (Before Contacting Client)
A. Online & Public Records
- Company Website & Domain Age (Check via WHOIS) – Fake sites often have short domain lifespans.
- Google Maps/Street View – Verify physical address matches claimed operations.
- Business Registration (e.g., U.S. Secretary of State, India’s GST portal, China’s AIC).
- Credit Reports (Dun & Bradstreet, Experian, CreditSafe) – Look for Paydex score (80+ = good).
- Legal Filings – Search for lawsuits, liens, or bankruptcies (PACER for U.S., local courts elsewhere).
- Export/Import Records (Panjiva, ImportGenius) – Confirm shipping activity for manufacturers.
B. Reputation & Reviews
- BBB, Trustpilot, Google Reviews – Check for unresolved complaints.
- Glassdoor/Indeed – Employee reviews mentioning late salaries.
- Industry Blacklists/Forums – Some sectors share lists of non-payers.
2. Initial Contact & Subtle Vetting
- Ask for Trade References – Request 2–3 supplier contacts and call them directly.
- Payment Terms Discussion – Gauge reaction to questions like:
- “What’s your standard payment process with vendors?”
- *”Do you require Net-60, or can we do partial upfront?”*
- Check Responsiveness – Slow replies or evasion may signal future payment delays.
3. Physical Verification (For Factories/Offices)
A. During the Visit
- Production Activity – Machines running, workers present, inventory stocked.
- Certifications – Ask for ISO, BSCI, or industry-specific licenses.
- Employee Interactions – Casually ask workers:
- “How long have you worked here?” (High turnover = red flag).
- “Does the company pay salaries on time?”
- Accounting/Finance Team – If they refuse introductions, be cautious.
- Other Clients/Suppliers – Look for logs of recent visits or signed contracts.
B. Red Flags
- Empty warehouses or “slow production days.”
- Refusal to show full facility (hiding areas?).
- No landline phone – Only mobile numbers provided.
4. Financial Deep Dive
- Bank References – Some clients provide bank letters confirming good standing.
- Supplier References – Ask: “Do they pay on time? Any delays?”
- Public Financials (For large companies) – Check SEC filings (10-K/10-Q) or local equivalents.
- Customs Records – Verify export claims (Panjiva, ImportGenius).
5. Contract & Payment Safeguards
- Clear Payment Terms – Net-30, late fees (1.5% monthly), and milestones for projects.
- Deposit Requirement – 30–50% upfront for new clients.
- Retention of Title Clause – Legal ownership until full payment.
- Personal Guarantees – For small businesses, have the owner co-sign.
6. Ongoing Monitoring
- Track Payment Patterns – Late once? Investigate early.
- Automate Invoicing & Reminders – Use QuickBooks, Xero, or FreshBooks.
- Annual Credit Checks – Re-run reports for long-term clients.
7. Exit Strategy for Risky Clients
- Escrow Services – For high-value deals (e.g., Alibaba Trade Assurance).
- Invoice Factoring – Sell unpaid invoices to a third party.
- Blacklist Repeat Offenders – Avoid future engagements.
Final Tip: The “Gut Check”
If anything feels off (evasive answers, pressure to skip checks), walk away.
Tools & Resources Summary
| Purpose | Tool/Resource |
|---|---|
| Credit Reports | Dun & Bradstreet, Experian, CreditSafe |
| Legal Checks | PACER (U.S.), local court databases |
| Export Verification | Panjiva, ImportGenius |
| Invoice Management | QuickBooks, FreshBooks, Xero |
| Escrow Services | Alibaba Trade Assurance, Escrow.com |
1. Legal & Government Verification (Pakistan-Specific)
A. Mandatory Business Registrations
- Chamber of Commerce Membership
- Verify via:
- Karachi Chamber of Commerce & Industry (KCCI) – www.kcci.com.pk
- FPCCI (Federation of Pakistan Chambers) – www.fpcci.org.pk
- Why? Membership indicates legitimacy and local network ties.
- Verify via:
- Sales Tax Registration (STRN) – Verify on FBR’s portal: https://e.fbr.gov.pk.
- NTN (National Tax Number) – Cross-check with client’s tax certificates.
- SECP Registration (For companies) – Search at: www.secp.gov.pk.
B. Local Legal Checks
- Court Record Search – Check for pending litigation at:
- Sindh High Court (www.sindhhighcourt.gov.pk)
- District Courts Karachi (Physical visit may be needed).
- EDA (Ease of Doing Business) Score – Research past disputes via Board of Investment (BOI) Pakistan.
2. Financial & Banking Checks (Pakistan Focus)
- Bank Reference Letter – Request from their primary bank (e.g., HBL, UBL, MCB).
- Credit Bureau Report – Obtain via:
- Credit Information Bureau (CIB) – Managed by State Bank of Pakistan (www.sbp.org.pk).
- PACRA (For large corporates) – www.pacra.com.
- Ask for Audited Financials – Legitimate firms provide annual audited statements (required by SECP).
3. Physical Verification (Karachi-Specific Tips)
A. Factory/Office Visit
- Verify Utilities – Ask for recent electricity (KE)/gas (SSGC) bills to confirm operational address.
- Check Labor Compliance – Ask for EOBI (Employees’ Old-Age Benefits) registration (avoid illegal factories).
- Local Influencer/Gatekeeper Feedback – Talk to:
- Nearby shopkeepers – “How long has this business operated here?”
- Security guards – “Do suppliers come often?”
B. Supply Chain Cross-Checks
- Visit Karachi Port – If they claim exports, verify shipping activity (ask for PIERS/LSC data).
- Ask for L/C History – Reliable importers/exporters use Letters of Credit (L/Cs) with local banks.
4. Local Reputation & Informal Checks
- Trade Associations – Contact:
- KATI (Korangi Association of Trade & Industry) – www.kati.pk
- SITE Association (for industrial clients) – www.site-association.com.pk
- WhatsApp/Telegram Groups – Join industry-specific groups (e.g., “Pakistan Textile Traders”) to ask discreetly.
- Local Newspapers – Check Dawn, The News for fraud alerts or client mentions.
5. Payment Safeguards (For High-Risk Markets)
- 100% Advance Payment – For new/small clients (common in Pakistan for unknown buyers).
- Documentary Collection (D/P) – Banks hold documents until payment (safer than open account).
- Islamic Banking Instruments – Use Murabaha (cost-plus financing) for trust-building.
6. Red Flags in Pakistan
🚩 No KCCI/FPCCI Membership – Unregistered businesses are riskier.
🚩 Cash-Only Demands – Avoids traceability; may indicate tax evasion.
🚩 Address in High-Risk Areas (e.g., SITE Area’s smaller units – higher fraud rates).
🚩 Over-Reliance on Personal Guarantees – Suggests weak corporate structure.
7. Tools for Pakistani Clients
| Purpose | Tool/Resource |
|---|---|
| Tax Verification | FBR’s IRIS Portal (https://iris.fbr.gov.pk) |
| Credit Reports | CIB (State Bank of Pakistan) |
| Export Verification | Pakistan Customs (www.pacustoms.gov.pk) |
| Local News/Alerts | Dawn.com, Profit (magazine) |
Final Tips for Karachi/Pakistan
✔ Prefer Established Industrial Zones (e.g., Korangi, S.I.T.E) over informal setups.
✔ Use a Local Attorney – For contract enforcement (recommended: Lahore/Karachi-based law firms).
✔ Start Small – Trial orders before large commitments.
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