Imagine you have a vacancy in your company. How would you fill it? You would request prospective candidates to send in their resume with information about their work experience, educational background and work skills, assess them based on their resume, interview them, and then decide on the right candidate.

Now, imagine your business needs to onboard a new supplier or that a new customer, distributor, or dealer is showing interest in buying your products or services. Naturally, you need to know the financial history, management background, creditworthiness and risk profile, and legal and compliance status before starting a business relationship with them. Unlike candidates you interview, companies may not be forthcoming about such information, which is why you need a Business Information Report about the entity from a neutral third party.

With is a Business Information Report?

A Business Information Report (BIR) is a document that provides a detailed legal, operational, and financial profile of a business along with a risk score. It includes the subject entity’s management background, financial history, creditworthiness, and risk-profile-related information. Organisations use Business Information Reports (BIRs) to assess the risk of doing business and decide on credit terms with new customers, distributors, dealers, distributors, and franchisees. BIRs are also used before appointing new suppliers and vendors to ensure that they are financially capable of meeting the supply requirements of a company. Bankers obtain BIRs about companies in India and overseas before taking lending or supply chain financing decisions; credit insurers obtain BIRs on domestic and international buyers before deciding to underwrite credit risk.

A Business Information Report typically has the following sections:

• Identity Check (KYC Information)
• Management and Directors’ background along with details of other companies where they are directors
• Compliance Check (GST, PF, Ministry of Corporate Affairs, etc)
• Analysis of Financial Statements for three years, including profitability, liquidity, solvency and efficiency ratio analysis
• Working Capital Assessment after studying the subject’s receivables and payables
• Litigation Check that examines cases filed against and by the company
• News Articles
• Social Media Checks, including feedback from customers and employees

Based on the above, the BIR assigns the subject entity a Risk Score, which throws light on the risk profile of a company (high, medium, low risk). When the counterparty is a customer, distributor, or dealer, the BIR can recommend a Credit Limit and Credit Period.

The information in a BIR is derived from structured and unstructured data from a wide gamut of sources, including statutory filings, financial statements, public records, news articles, and social media.

Why Obtain a Business Information Report and for What is it Used?

A BIR is more than just a background check of a counterparty. It has many uses:

1. Credit Decisioning: A BIR provides valuable information on a counterparty’s creditworthiness, track record, experience, and reputation that can help your organisation make informed business decisions, such as whether or not to extend credit to it, increase or decrease its credit limit, or enter into a new business relationship.
2. Supplier Selection: A company can use BIRs as part of its supplier selection process and avoid working with financially weak suppliers or those with significant compliance issues or litigation.
3. On-going Risk management: A BIR is useful in assessing, managing, and monitoring risks throughout a business relationship. At the beginning of a relationship, BIRs help assess the risk involved in doing business with the entity. Based on the BIR, your organisation can decide whether or not to work with another party. A BIR can also help determine whether you should scale up or reduce your business with a counterparty based on its changing risk profile.
4. Due Diligence Requirements: Company Boards and Risk Management teams usually have policies about conducting due diligence before partnering with a company or extending significant credit to it. The BIR provides valuable information for organisations to meet these due diligence requirements. Obtaining a BIR also helps the management team of a company establish that they have taken appropriate steps to assess the risk of a counterparty or partner.
5. Ensuring Compliance: The BIR also helps companies assess the compliance of their counterparties by throwing light on their compliance with statutory requirements such as GST, Provident Fund (PF), or Ministry of Corporate Affairs (MCA) filings. It is best to avoid working with a counterparty that defaults on its statutory requirements because it increases your financial and reputational risk.

How Do Rubix Business Checks Help Your Company?

When your company’s distribution and supply chain is financially stable, your credit and supplier risks reduce significantly. To secure your distribution and supply chain, ensure that you transact only with financially sound customers, distributors, dealers, franchisees, suppliers, and vendors. The Rubix Business Check, our BIR solution, is the easiest way to ensure that you have all the requisite information about your potential counterparty’s credibility. It provides the following information:

• Company identity check (KYC)
• Firmographic details/business facts
• History of changes in the Legal name of the subject entity
• Rubix Risk Score and Risk Category (High, Medium, Low), along with score rationale
• Recommended Credit Limit, along with rationale
• Statutory Compliance information
• External Credit Ratings issued by accredited Credit Rating Agencies
• Legal cases filed against, or by, the entity in various courts and tribunals
• Current Board of Directors; Partners or Proprietor
• Details of other company directorships held by Directors, Partners, Proprietor
• Ownership Details
• Shareholding Pattern
• Additional Funding since the end of the previous financial year (this is particularly useful for assessing the cash flow of loss-making start-ups)
• Detailed Balance Sheet
• Detailed Profit and Loss Account
• Cash Flow Statement
• Rubix Revenue and Profit estimates for proprietorship and partnership firms (in the absence of financial statements, as these firms do not need to file their financials with the Ministry of Corporate Affairs)
• Solvency Ratios
• Leverage Ratios
• Efficiency Ratios
• Profitability Ratios
• Contingent Liabilities
• Quarterly Financial Results
• Segment-wise Financial Reporting
• Auditor Details
• Banker Details
• Related Party Transactions
• Subsidiary Information
• Index of Charges filed with the MCA for registered charges created by banks and financial institutions over the assets of the company
• Social media (Customer and Employee Sentiment Score)
• Published news about the entity

In today’s VUCA environment, even companies that, prima facie, seem reliable and robust can be in a precarious position. It is, therefore, necessary to ensure that every counterparty risk you take is backed by accurate and updated information about the entity. Rubix Business Checks enable you to confidently forge new business relationships that help your company grow.