How can you be sure that suppliers you engage are reputable? Here are four ways to spot whether a supplier is showing signs of business failure.
If you’re looking to engage a supplier, there are certain checks you can run on them before you start working together. Or if you’re already working together, take some time to go through how often they invoice, how frequently they chase payment, what their payment terms are, and so forth. Each of these variables can give you valuable insights into their financial health.
If a number of credit enquiries are made, especially in a short space of time, this can sign a warning bell that the supplier may be in financial trouble. Search for a business to find out more about their credit history.
Once you have carried out the above preliminary work, it can help to look for patterns or changes to their credit score over time. Credit scores can be recorded in a ‘traffic light’ pattern with green being positive and red being potential cause for concern. Any changes to these patterns can provide useful clues as to the financial health of the company you’re looking to engage as a supplier.
This last step requires a big picture approach, where you reflect on the market your supplier operates in and research the latest trends and patterns. Is the market growing? Being undermined by increasing competition? Heading offshore? Becoming more niche and scarce? All of these determinants can help you to assess which suppliers you want to engage and most of all, understand the value they can bring to your practice.
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