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