DIY Due Diligence
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Discussion

Smiler.

Original Poster:

11,752 posts

260 months

Thursday 17th August 2017
quotequote all
Whenever I'm about to spend some money (either personally or business - sole trader so same thing really), I carry out a bit in internet research.

There are a couple of useful sites that give info of the apparent health of a company, plus any good/bad reviews with are publicly available.

On the "health" aspect, seeing that a company's returns are late or any other penalties filed ring the obvious alarm bells.

But less obvious is the financials aspect.

A widening gap between assets & liabilities leaving the net worth negative could be a problem.

For example, to commit to a contract with a company that has a negative net worth equal to or greater than the value of the contract - is this obvious madness?

Thinking specifically about the Construction industry, for a contract value of say £50-80K - should a company with a negative net worth even be considered?

I would say exceeding a certain level, of course not. But I'm sure there's a bit more to it than that.

Please could those with experience/knowledge in this area share a few pointers.

Cheers smile

Dixy

3,660 posts

235 months

Thursday 17th August 2017
quotequote all
Which sites do you use, the trouble with many of them is they are a bit "computer says no"

Smiler.

Original Poster:

11,752 posts

260 months

Thursday 17th August 2017
quotequote all
Dixy said:
Which sites do you use, the trouble with many of them is they are a bit "computer says no"
Mainly Company Check & the Companies House one.

I haven't used one that actually says "don't do it".


I told you it was "DIY"

biggrin

Vaud

59,747 posts

185 months

Thursday 17th August 2017
quotequote all
You can derisk most contracts with staged payments, etc - RIBA have some standard contracts for larger work.

I hire people mostly based on local recommendations - it's a small area so word spreads quickly about dodgy tradesman. I use the local village Facebook group to check what people are saying.

Smiler.

Original Poster:

11,752 posts

260 months

Thursday 17th August 2017
quotequote all
Vaud said:
You can derisk most contracts with staged payments, etc - RIBA have some standard contracts for larger work.

I hire people mostly based on local recommendations - it's a small area so word spreads quickly about dodgy tradesman. I use the local village Facebook group to check what people are saying.
Yes, ordinarily that's also the sort of thing (although I don't use Facebook any more).

But one company that used to merit a fairly prolific level of recommendations has just gone bust.


What standing would you give a trade body affiliation, like the FMB?

Vaud

59,747 posts

185 months

Thursday 17th August 2017
quotequote all
Smiler. said:
What standing would you give a trade body affiliation, like the FMB?
Not a lot. "The Federation of Master Builders (FMB) is a UK trade association established in 1941 to protect the interests of small and medium-sized building firms"

Their insurance might be worth looking at but I don't know anything about it.

Bristol spark

4,510 posts

213 months

Thursday 17th August 2017
quotequote all
I wouldn't believe a word these company check sites say.

Mine says i have £13K liabilities (i dont have any loans etc)
And i also don't have £22K of assets!


Smiler.

Original Poster:

11,752 posts

260 months

Saturday 19th August 2017
quotequote all
Vaud said:
Smiler. said:
What standing would you give a trade body affiliation, like the FMB?
Not a lot. "The Federation of Master Builders (FMB) is a UK trade association established in 1941 to protect the interests of small and medium-sized building firms"

Their insurance might be worth looking at but I don't know anything about it.
Ha!. The first local company I checked out from their site went into liquidation a year ago.

What a load of tosh.


Bristol spark said:
I wouldn't believe a word these company check sites say.

Mine says i have £13K liabilities (i dont have any loans etc)
And i also don't have £22K of assets!
I've often wondered about this. Do you think it's affected your business influx at all?



Si1295

398 posts

171 months

Monday 21st August 2017
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Companies House et al only show abbreviated accounts so it's quite easy for a company to show negative on the balance sheet when they're profitable

anonymous-user

84 months

Tuesday 22nd August 2017
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I'm working on two projects at the moment, professionally advising on an 8 Billion US$ construction project, socially doing a 10 K US$ restoration on my Elan.

The risk process for both is the same, reliable contractor with a good reputation for similar work, working capital to fund the stages of the project, keep payments behind progress, know what you paid for and where it is, and have a contingency plan to take physical possession in the event of failure. Monitor progress.

So we know what to do if a supplier in China fails to deliver equipment we paid for, and I have a man with a tow truck who I could phone to get the car out of the garage within 1/2 a day.

Simple analysis of a balance sheet that can easily/legally be 18 months old is required, but it is not the only or indeed most important criterion.