UPFRONT Courting company disaster

If you want to know whether company is likely to succeed or not, it’s worth checking the court records of its individual directors.
Recent research by leading business information company Dun and Bradstreet has found that company directors who’ve been subject to civil court action are 15 times more likely to fail in their current business venture than those whose track record is squeaky clean.
“We also know that, if New Zealand director has been on the board of company that has failed, the risk of their next venture sinking trebles,” says D&B general manager John Scott.
The court records of companies has similar predictive value – those who’ve been subject to court action are 20 times more likely to fail than those without, says Scott. All of which should serve as ‘steer clear’ warning for businesses that don’t want to risk exposure to bad debt.
In uncertain economic times, companies need to be smarter about credit risk and that means knowing more about the businesses they’re dealing with – including the history of the directors, says Scott.
“That way you can prevent potentially hefty losses from dealing with business that is about to become insolvent. It can stop the domino effect that often causes other companies to fail because of money owed by the insolvent companies.”
D&B’s research, which is based on the records of 64,000 New Zealand companies over one year, offers some powerful indicators, he says.
“It’s not saying that these businesses will fail – but it does say there is significant increase in risk that you should be aware of.”
While this country’s small to medium businesses tend to see such checks as confined to the realm of big business, that’s not the case, says Scott whose company offers credit checking service particularly developed to help small businesses protect themselves.
“For the price of paperback novel, you can do commercial bureau inquiry which will give you all company details that highlight such black mark indicators.”