Should You Background Check Your Suppliers And Clients?

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The quick answer is yes. As a business owner, you need to find effective ways to mitigate risks, and one of them is to run background checks before committing to any contractual relationship.

Serious companies consider vendor and client background checks as part of the due diligence process. Aside from risk mitigation, it helps build a reputation as a company that takes their professional relationships seriously.

Uncovering Troublesome Patterns

If you are about to sign a contract with an important client or if you are hiring the services of a new supplier, you need to confirm they are trustworthy. Go to and run a background search for basic information on someone. Some of the things you need to verify are:

  • Alternate business names: A bankruptcy process or a troubling debt pattern are some of the reasons why someone decides to start a vendor under a new name.
  • Criminal Convictions: Suppliers with criminal convictions may pose serious risks for your company or your clients. Under the Fair Credit Reporting Act, criminal records older than seven years will not appear in a background check.
  • A history of lawsuits: Important clients who have been through several lawsuits involving their business are likely to repeat the pattern.
  • Better Business Bureau: Understand how a company responds to client’s complaints and steer clear of fraudulent vendors or clients.
  • Insurance Checks: Suppliers should provide their own insurance, or you may be liable for their mistakes or accidents.
  • License and Certification compliance: You are directly responsible if you hire unlicensed suppliers, and you may suffer important financial consequences if they don’t comply with industry standards.

Before You Choose a Supplier

A background check helps you determine if a supplier can be trusted, but there are many steps to take before signing a contract. These are some of the most important: Establish Criteria: What do you need in terms of delivery dates, quality control, and delivery methods?

Do you need to have special storage facilities? Do they have a clear return policy? Always ask for a direct contact (also known as Key Account Manager in some companies) Think about this as a job posting: carefully detail what you are looking for, your deal-breakers, and quality standards.

Once you found your supplier, determine monitoring strategies to guarantee good work.

Before You Take on a New Client

Taking on new clients is what every business looks for, but bad clients (for example, those who refuse to pay for your services) may end up costing you more. Before you sign that coveted contract, make sure to:

  1. Check references. You can politely ask your client about previous projects and try to find out how the relationship unfolded. Who ended it? Were there any issues?
  2. Agree on rates and define the scope of the project. Using this as your starting point, create and sign an agreement. If you don’t know where to start, ask for help from an attorney.
  3. Try to evaluate how demanding your client may be and establish clear boundaries from the beginning.
  4. Establish what you need from the client in order to perform your job, and how they will give it to you. Think about stuff like access to their facilities or documentation, or the possibility of interacting with their staff.

Bottom Line

Suppliers are the backbone of your business. Without them, you cannot do your job. But jumping into a contract with the first one who offers a reasonable price or seems “nice enough” can have catastrophic consequences for your reputation. Never underestimate the value of proper due diligence and learn as much as you can about a company or contractor before you make a final choice.

Clients, on the other hand, are what keep your business alive. But accepting all clients can also become an experience from hell, especially if they refuse to pay for your services when you finish your work.

Today’s business world is permeated by information technologies that allow for risk mitigation, so why take a chance?

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