Credit checking a company prior to doing business with them is common knowledge, businesses today need to be aware of the payment behaviour of companies they are dealing with to be able to forecast their own cashflows. You can get an insight into an organisation by looking at their website, conducting a news search, etc. however for a deeper insight into a company you need to check their company credit report.
Company credit reports are like gold dust when it comes to trading. They can not only show you information about a company’s key financials and payment terms, but they can also offer you information on a director or directors. Director information can offer you an insight into the management and ownership structure of the business so you can gauge how operations work within the company. Why would a director be significant and why should you run a director search? Here are some key reasons.
A director is a key person within an organisation- big or small
There is a definitive link between a company and its director. Small to medium companies are more likely to have 1-3 directors, and larger businesses could have a board of directors than run the operations of the company. The director or directors can hold massive influences on the performance of the business, and they could be heavily involved in the strategic planning and execution of the business plan. If the director(s) are the founders of a company it is valuable to know as much as you can about these entrepreneurs as success often filters from the top. If the directors aren’t performing, the business could potentially deteriorate. Directors will establish the company’s ethics, culture and morals and a lot of the time they will be heavily involved in the operations and financial side of the business as well so running a director search could help your due diligence into a business before you trade with them.
What impact does the director have?
When conducting a director search, it’s worth checking how long the director has been at the company. If there is a high turnover of directors, it could mean something is going on within the company that could affect its generation of business. The problems could be that the directors aren’t getting on, or the business plan keeps changing or is unstable. It could be that the organisation of the business is failing, employees aren’t agreeing with the leadership tactics or even something like a director has more on his or her plate than they should. For a company with a high turnover of directors there is always a reason for it, look for trends within the search that could pinpoint the reason. Check the company’s credit rating when certain directors joined, did they go up or down? Are the directors having a positive impact on the business or are they dragging it down? Look for links in a company credit report to the time the director joined the business. If the company has any bad debts, CCJs, etc. always check when they were issued and who was directing the company at the time.
Be aware of disqualified directors
A quick director search can also reveal any criminal activity or disqualification. Not only can you identify your director is who they say they are by proof of address and date of birth; if they have been disqualified it will show up on their director search. It is illegal to deal with a director who has been disqualified so always double check they are legit.
An insight to the past
A director search can show you all the past and present appointments a director has, and it can even link you to their other companies. If a director has a long list of previous directorships, it’s worth checking the companies out to see what went wrong and how long they remained active. If a director has managed a lot of companies that have failed, there could be a pattern of poor management that could continue with the current company you are looking to trade with. Likewise, if the director has a reputation for taking start-ups and turning them into power house companies, this will show on his or her report.
Our director search tool even shows you the company rating at the time the director joined the business and when they resigned, along with a current credit score. This allows you to see the pattern of how the business performed when it was under management of the director in question. On the other hand, if a director has a lot of current directorships the amount of time and effort he or she invests in his or her companies could be questionable. If that is the case, it’s worth asking who you will be dealing with on a regular basis and who is running the operations and finances of the company so you can form a relationship with them on a personal level.