Business is all about relationships. By building strong relationships with clients, suppliers and influencers, businesses can grow and evolve to better meet the needs of those they serve.

As with any relationship, business relationships require a large degree of trust and mutual benefit. While we may want to operate in a world where trust is a given, the reality of business is that trust must be earned - and that starts with a solid due diligence process.

What is due diligence?

Due diligence is the process employed by businesses to investigate the financial standing of a company or person they seek to work with. Essentially, due diligence comes down to understanding the credit risk of the other party in order to make an informed decision on whether or not to work with them.

Due diligence tends to be carried out in the process of negotiating larger contracts. In the past, access to data meant accessing different databases and was difficult or expensive to obtain, meaning only larger businesses could conduct it comprehensively.

Standard process

Today, company information is much easier to access and thanks to services like Company Check, businesses of any size are able to see credit data , risk scores, CCJs and Payment History of the companies they seek to work with. Due diligence is no longer reserved for larger scale projects, but is an integral part of conducting business.

So what does this mean for the way we work?

As a business owner myself, I know the importance of being able to trust any party with whom you work. But I also know that businesses can be caught out and the consequences can be catastrophic if payments are delayed or not made at all.

It’s not a case of businesses being suspicious of one another. It’s simply about being sensible with your company’s finances and clarifying, ahead of any business relationship even starting, that the company you seek to work with can fulfil its end of the deal too.

Consider a situation where due diligence is not conducted. A company may start or even complete a service provision or provide a product before finding out that the company they’re working with has a poor credit rating or, worse still, is trading insolvently. This is a situation no business owner need find themselves in, if they’re sensible.

In addition, by undertaking due diligence, we can make much more informed decisions. Let’s say the relationship with the other party was already good, but prior to signing a contract you find their credit rating isn’t as good as you’d hoped. Now this isn’t to say that you shouldn’t work with that company, but it does give you the opportunity to explore the reasons for the rating and come up with a solution that suits you both.

Trust is key

Trust really is key in business. When you can trust a company, working with them becomes much easier and you’ll find you’re more likely to retain that customer or secure better deals with that supplier. It works both ways too; when a customer or supplier feels they can trust you, you’ll benefit as well.

Due diligence isn’t the be all and end all of trust in business, but it is the starting point. Get your facts straight, act sensibly and your relationships will be much stronger in the long run.

 

By Alastair Campbell, founder of Company Check.


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