Written by Zahra Saeed
Posted on 18/02/2015

Ring the alarm, your supplier is in dire straits – just due it!

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When it comes to choosing the right supplier, it pays to be apprehensive, and even more so to be proactive. It’s not simply a question of picking the company that’s most cost-effective, or the contractor who impressed you the most. Of course you need to think strategically, but even if a supplier ticks all the boxes it is essential to conduct all the necessary due diligence checks in order to avoid problems in the future. And from not meeting legal quality standards to issues with creditors, there are a lot of complications you could avoid simply by preventing them in the first place. Here are some important but easy due diligence checks to make before you sign on the dotted line.

Are their documents up to scratch?

Nowadays, you’ll be able to find a company’s business registrations and public documentation quite easily online. If your supplier is a limited company based in the UK, you’ll be able to check their registration details and even download their latest accounts information from Credit Reference agencies and Companies House. For European VAT-registered suppliers, you’ll be able to check the validity of their VAT information by using the European Commission VIES website.

If your supplier says it has been accredited by a quality standards agency, don’t just take their word for it – ask to see certification or documents. Some agencies, such as BRC Global Standards, even have an online directory to safeguard against fraudulent documentation so it’s worth doing some research on the most secure option in every case.

Have you done a company check?

Many reputable companies offer a free basic company check, so this is something you should certainly take advantage of when auditing a supplier. In addition, it’s always worth Googling the company as this quite often brings up any reviews – good or bad – from previous clients. If it’s convenient, consider also meeting the supplier in person and visiting their premises. This can give you a real feel for the company and will help you determine whether you can have a positive business relationship with them moving forwards.

Are there any geographic concerns?

For the third year running, business interruption and supply chain risk ranked as the number one business risk in 2015 according to the Allianz Risk Barometer. Obviously, catastrophes such as the 2011 Japanese tsunami, which had calamitous effects on supply chains across the US, are still preying on business leaders’ minds. While natural disasters are generally difficult to predict, it’s a good idea to look into whether there is any political unrest or other risks that could affect your supplier’s output, and as a result prevent you from meeting delivery deadlines.

Is there an anti-bribery policy?

According to a recent survey commissioned by global supply chain management company Achilles, 50% of the 300 large companies questioned hired a supplier without any knowledge of how they dealt with bribes and corruption. This is despite theft, fraud and corruption being one of the top ten risks for businesses in 2015, according to the Allianz Risk Barometer. Making inquiries into anti-fraud policies is particularly essential when dealing with suppliers that based overseas (something that is becoming more and more common), especially when they are in countries where bribing is generally accepted within the business environment.

Undertake a supplier check