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February 2, 2017

What to Do When a Vendor Refuses to Provide Financial Statements

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When a third party company doesn't provide financial statements we tend to think there's nothing we can do. But actually, there is and we'll show you that alternate path in this video.

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Podcast Transcript

michael_bowers_circle.jpgWelcome to Venminder’s Third Party Thursday! I am Mike Bowers and and I am the Chairman here at Venminder.

Today’s topic: What do you do when a vendor refuses to provide financial statements?

All of us have heard “We are a private company and don’t release financials.”  Typically, our reaction has been, "Well I guess there is nothing I can do."

THE ISSUE IS: These companies who won’t provide financial information just don’t, or won’t get it.  

They are very difficult, if not impossible to persuade. It is, however, your responsibility to determine the vendor’s health. HOW BIG OF DEAL IS IT REALLY? 

We do hundreds and hundreds of financial statement reviews: 

In fact, 65% of all the analysis we do is on privately held companies. On 94% of those privately held companies, we still get some type of financial statement. Therefore: it is only 6% (those who don’t provide information) that is the worry spot. So, it is not a huge problem, but it is still an issue.

For most of us, the unwillingness of a company to provide a financial statement was considered to be a big negative tell: the company must have something to hide. So, we decided to look at the data a little deeper. We specifically looked at that bottom 6%.  

Here is what we found:

60% of those who did not provide financial information were later judged to be okay; only 40% were not.

Problem is: you don’t know which ones.

However, the data gave us the bigger surprise: All of those companies (that bottom group) are older companies - at least 13 + years old. They are NOT start-ups.

So, here is the suggestion:

All of these companies, (that bottom group) who refuse to provide financial statements...each of them has a long track history in business. With that long track history comes a rich review of the vendors health by their suppliers, the companies they do business with. This review is all captured in trade reviews and ready for you to look at.

There is a wealth of great information in these reviews on:

  • How timely are their payments
  • The trend in their payments (slow or prompt) 
  • How much, if any, has been sent to a collection agency

Also, the data will tell you if they have any legal issues with 

  • Bankruptcies
  • Judgements
  • Suits or
  • Liens

It is all there. And, if reviewed properly, it will give you a great picture of your vendor’s health even if they are unwilling to provide you with their statements. 

Thanks for watching! This is Mike and don't forget to subscribe to next week's Third Party Thursday. 

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