In today’s business world you have to constantly be on guard against scams and the people who perpetrate them. Whether it is a prospective employee, customer or partner you have to take the steps to minimize risks. Background checks and investigations are a valuable tool that every business should use to protect itself from legal and financial threats. It is recommended that a bankruptcy search be an integral part of any background investigation.
A bankruptcy search will in many cases determine if a potential customer has had financial problems in the past. Insolvency and debt collection problems are critical issues when you decide to extend credit to a new customer and also when you are receiving large expensive orders. In many cases it would be wise to do a background check including a bankruptcy search each year.
Any time your account receivables begin to show late or partial payments you should also consider doing another background check. A bankruptcy search will show that a business is in the process of petitioning the court for bankruptcy protection thereby allow your business to stop shipments and require prepayment for additional orders. Many new bankruptcy filers will not notify their suppliers of an impending bankruptcy.
It is not uncommon for one business bankruptcy to cause additional bankruptcy problems with its suppliers and business partners. This cascade effect could cause your business and its employees to lose everything that you have worked so hard for. It is a lot easier to stop a line of credit to a customer with financial problems then to recover a debt as a creditor during any bankruptcy proceedings.
Any time an account begins to fall behind in making regular monthly payments should be cause for additional scrutiny. If your relationship with a customer also starts to deteriorate then you should consider requiring payment on delivery. In addition you may want to initiate your collection efforts as soon as an account is more than 30 days past due. The use of an online collection agency is a fast and fairly inexpensive method of making initial collection efforts. Again this may be the time to conduct another bankruptcy search to assure that the customer has not petitioned the court for bankruptcy protection.
A bankruptcy search is in general not that expensive and in many cases be a good investment in the well being of your company. It must be understood that a bankruptcy search may or may not detect all bankruptcy proceedings. The lack of proper recording of bankruptcy proceedings can be a problem. However a check of local state and federal bankruptcy records in the state the customer is located will in most cases assure that you will have up to date information.