Retail surgery: Our overseas suppliers check our business’ credit worthiness, but should we also look into how able they are to pay their bills?

If suppliers are asking for money up front ahead of stock being delivered, or if continuity of supply is important to your business, then it is worthwhile running credit checks on suppliers before you deal with them.

Martin Williams, managing director of credit risk agency Graydon UK, says: “You need to look up the supply chain as well as down it - it is just as important.” He adds: “Where continuity of supply is very important then you have got to understand the financial stability of the business.”

This is especially true when working with overseas suppliers. Williams says the standards of documentation are not the same in all countries, but the major credit reference agencies have data on firms in hundreds of countries available online, to make the process of checking them out as easy as possible.

He explains that in the UK we are fortunate to have a central government registry with a lot of information on companies that is public record. In Germany and the US this information is not centralised; and in the Middle East there are no credit agencies, so Graydon has to source information from lawyers. He adds: “In ex-Communist countries credit information is in its infancy, but has developed quickly in countries like Poland and the Czech Republic.”

Williams adds that if you are asked to pay up front for stock samples or initial orders, before you have the chance to do a credit check, try to do so on a corporate credit card to ensure maximum protection.