Small businesses across the UK are being advised to check on the financial status of potential business partners before working with them, say 192.com.
The online business directory were basing the advice of a recent survey in which one in three (33%) of Small and Medium Enterprises (SMEs) said that they were unaware of their business partners debt. An additional third of those responding also advised that their partner hadn’t told them the truth in relation to their financial position.
Over 20% of all SMEs who responded said that had been involved in a financially damaging business relationship as they hadn’t performed the necessary due diligence on their business partners credit rating before entering into a business relationship with them.
A further 77% hadn’t performed the simplest of research tasks on their potential business partners credit rating by failing to obtain a credit report. Credit reports, which can be purchased online, provide detailed information on the credit status of a potential business partner, including details of any County Court Judgement.
Dominic Blackburn of 192.com said:
“We advise business to use a company credit report to find out whether a potential business partner can service its debts, pay its suppliers on time, and maintain stability at board level.”
The most troubling aspect of a company credit report was found to be outstanding charges, followed by county court judgements and poor working capital. Close to half of respondents also said changing the business name several times would be a cause for concern.
Other key findings from the survey:
- 32 percent had not been told about the state of a company’s finances
- 22 percent had experienced a financially unstable business partnership
- 70 percent of businesses would be troubled by outstanding charges against a company
- 65 percent would be concerned by county court judgments
- More than half would be put off by a company’s poor working capital.