Business Check Importance
A business check has become important due to the phenomenal growth in outsourcing. Competitive pressures are forcing corporations to outsource non-core processes to suppliers onshore and offshore. The US automotive industry supply chain, for instance, has become global in nature, with component manufacturing shifting to low-cost countries in Asia, such as China and India. The same is the case with the software industry, where India has become a magnet for global outsourcing contracts.
A typical business check goes through four phases.
- The first phase of the business check process begins with an analysis of the information filed by a company with regulatory authorities such as Companies House in the UK. This preliminary business check also involves a scan of the news reports featuring the company.
- In the second phase of the business check process, information from outside providers such as credit reference agencies and stock brokers is analysed. The credit reports from credit reference agencies such as Equifax play a crucial role in the business check process.
- In the third phase, the claims of a business relating to quality, cost and deadlines is independently ascertained through published information and interviews with bankers, suppliers, customers and competitors.
- In the fourth phase, a background check of the owners and key employees is carried out.
Most corporations have structured programmes for assessing suppliers. Most business check processes outlined above are built into the supplier selection programme. In addition, corporations in sectors, where offshoring is at an advanced stage, hire outside investigators to carry out a credit check of the suppliers.
In the past few years, the scope of business check has also broadened to include qualitative criteria such as integrity. While quality, cost and the ability to stick to deadlines remains important, integrity has become critical due to rising offshoring of services to countries where intellectual property protection may be weak. In the software sector, instances of vendor's employees selling pilfered data on the web have come to light. While harsh penalties will cut down such problems, integrity will ensure that such problems do not arise in the first place.