One thing that’s usually helpful is to check the last 3-5 years YOY turnover and also get a clarity on future expansion plans and infrastructure upliftment. Another important point is to check on key customers and business status with those key customers.

Initially, examine their balance sheets, income statements, and cash flow statements for the previous few years in order to perform a comprehensive financial analysis. To determine their creditworthiness, take into account getting credit reports and credit ratings from reliable sources. To learn more about a client's dependability and payment history, it's a good idea to ask for references from previous or present customers. Additionally, check if they have measures in place to deal with financial difficulties by evaluating their business continuity plans. Last but not least, think about incorporating regular financial reviews or audits as well as other financial performance standards within the contract to ensure their continued stability.

When evaluating a vendor’s financial stability, review their financial statements and credit score to gauge their health. Ask about their payment practices, outstanding debts, and contingency plans for financial difficulties. Get references from recent clients to confirm reliability. Protect yourself with contract clauses that allow for exit options, and consider paying in stages based on performance. Regularly review their financial situation throughout the partnership and stay alert for early signs of trouble.

In the initial stage, it is important to check the vendor's previous year turnover and obtain details about their existing customer list. Understand the payment terms they currently have with their existing customers and what they are proposing to you for new business. Based on the payment terms, you can assess the financial stability of the supplier, making it easier to decide on long-term business cooperation.

During the vendor selection process, it is important to have a professional and non-intrusive approach when discussing the financial soundness of the vendor. Suggest that you would like to collaborate with them, and emphasize that the project's success depends on stable finances. Request a financial report and assess their financial standing. If worries remain, talk about possible risk-reduction tactics like performance guarantees or phased payments. Establishing and maintaining a stable partnership can be facilitated by transparent communication and handling of finances.

"Trust, but verify," advises former U.S. President Ronald Reagan, and this is especially relevant when selecting vendors. If you have concerns about a vendor’s financial stability, conducting a credit check is crucial. In my experience, a thorough credit check provides insights into the vendor’s financial health, including their ability to meet obligations. One thing I’ve found helpful is to request financial statements or third-party reports, such as Dun & Bradstreet ratings, to validate their stability. A common mistake is relying solely on the vendor’s assurances without verification. By performing due diligence through credit checks, you mitigate risks and make informed decisions during the selection process.

Consider the vendor's credit score in the context of their industry and your specific requirements, and weigh the credit check results against other factors such as their reputation and performance history.

Assess the consistency of the references' experiences with the vendor's stated financial health and operational practices to ensure a well-rounded evaluation of their reliability. >>Cross-check the feedback with the information obtained from credit reports and other sources to identify any discrepancies. This comprehensive approach will help you make a more informed decision about the vendor's suitability for your needs.

Some times the revenues and team size of the Vendor may completely give wrong signals.. Let me explain.. During 2002 we lost a big ERP order. Back then we were 10 people. The order went for a public listed company, they were 250 people with all professionals on board. But the company went bust. Especially in the software space. 1. The commitment and vision of the core team 2. Their existing customers 3. Solution support 4. Upgrades

Check the vendor aging reports Some vendors don’t reimburse their employees or vendors for upto 6 months . That is a red flag. I would not want to associate with an organization like that Also talk to prior clients. Would they rehire them as a implementation partner

Have you thought of a software or a SaaS escrow to mitigate risks? Let me explain. Vendor shutting down (not just bankruptcy) especially startup vendors is quite common. That means the software we are using or the SaaS offering we are using could be turned off and depending on how critical it is to our operations, it is a big risk. I’ve had the misfortune of a startup software vendor shut down and we had bought their on premises software. Luckily, thanks to our prudent in-house legal counsel we had added a software escrow clause into the contract and that saved us. I haven’t done SaaS escrow. I am told that is also an option these days.

I have found keeping things simple helps the most. Risk analysis based on due diligence is key. Due diligence has to consider all of the above. But also remember, a business that is growing YoY is key. This tells you much more than balance sheets. And finally, the age old ‘security deposit’ can be used as a safeguard. The SD will weed out some vendors that aren’t serious about winning your business.

Having ready a Contingency plan is vital and must have below points: Alternative Vendors: Pre-screen alternative suppliers who can step in if your primary vendor goes out of business. Use multiple vendors if they are available. Stock Management: Boost safety stock levels to mitigate supply disruptions. Contracts: Should have clauses in contracts that address bankruptcy like early termination rights and financial penalties for late delivery. Plan B: If products or commodities are strategic and difficult to replace . Is good to analyze if extending a credit line, injecting capital or acquiring your vendors assets might be convenient for the organization.

I would never make a conteng.ency plan rather would evaluate a financially strong vendor as i consider project time and cost is most important factors in a successful project so select one time not to make alternate plans, as a usual practice in gulf vendors subcontract the project and dont pay their sub contractors best is to check the previous delivered projects and vendors market reputation while selection " do not make contingency plan make your first plan a strong successful plan " if your plan is perfectly fit your project will be successful

In my experience putting a bit harsh contrast term helps an organisation to sustain and utilise vendors optimistic. At a time the organization find difficult in a critical project to leave vender and on board another one. So contract term has to draft sensibly

Shernaz.. Great start with financial statements to continuously asses the financial soundness of the vendor.. other aspects of monitoring - assess the performance to the SLAs they have been contracted for - assess the market share of the vendor (is the vendor loosing to other competitors?) - assess the currency of the technology.. is the vendor keeping up with technology trends investing in new technologies - assess the security posture of the vendor as the cyberattacks can originate from any where in the supply chain (the weakest link)

Monitoring is a good way, However it requires efforts and time if not automated. Again, bases on which factor evaluate the vendor is a problem. KPI and OKR has to put in a ways that clearly give indication about vendors performance and it has to carry out evert week.

In my opinion Do a proper check while selecting a vendor. This would involve checking on their credibility in their market, and also check their financial statements by asking them to share it. And get the Vendor agreement prepared exhaustively by both parties and signed by them. This increases the Accountability. And have a person from your side monitor the vendor at regular intervals. Also build a good relationship with them which goes a long way in building win win long term associations.

Have a strong governance plan in place. Regularly have meet-ups with the senior Management of the vendor to get a feel of how the relationship is doing.

The simplest and easiest way is to review the financial statements for minimum three years and that would give lot of key inputs for assessment.