Understanding the financial health of your service providers is a crucial step in deciding who you work with.
When working in property management, you are reliant on your service providers to deliver a high-quality service. This is especially important for maintaining and improving your properties.
This level of dependence is dangerous because your business’ reputation is left in someone else’s hands.
Choosing who you work with is a big decision because it impacts your supply chain, your tenant relationships, your investments and more.
In this article, we want to outline why it’s important to understand the financial status of your service providers, the impact of not knowing your service providers’ financial status and how Prosure360 can help. Our topics will also cover:
- What does financial health mean?
- Why is the financial status of your Service providers important?
- What is the impact of not checking the financial status of your service providers?
- What is an example of a service provider who was financially unstable?
- Do you need to check the financial status of your current service providers?
- Where can you check the financial status of your service providers?
- How can Prosure360 help you manage your service providers?
What does financial health mean?
The financial health of a company is defined by what the cash flow is like, how much debt they have, the liquidity of assets and a range of other factors.
So, what should you look for when checking the financial status of your service providers?
Checking the financial status of any company means looking at cash flow—you need to find out whether they have enough money to withstand the piece of work you are commissioning. This would involve looking at the company’s balance sheet, financial forecast, balance sheet, income statements, and any other documents that can give you a better idea of their overall financial health.
The key areas you should check are the liquidity of assets, operating efficiency, and the profitability score. Essentially, you are trying to figure out whether your services providers are financially stable and if they could be trusted to deliver the work without any financial hiccups.
Why is the financial status of your Service providers important?
So, why should your service providers’ financial status matter to you?
Without knowing the financial position of your service providers, you could enter into risky professional relationships. This means your business could lose money, fail to meet project deadlines, and damage your reputation.
Knowing the financial position of your service providers will give you peace of mind that your existing and future providers can be relied upon. This means that your business’ reputation will be safe, your properties will be being adequately maintained, and your stakeholders and tenants will trust you.
What is the impact of not checking the financial status of your service providers?
Needless to say, not knowing the financial status of your services providers could be disastrous.
When a service provider doesn’t turn up on time or completes a job poorly, it doesn’t just reflect badly on them, but also on your business.
If your service provider fails to deliver due to their unstable financial situation, not only will your tenants been dissatisfied, but your investors will lose trust that you can effectively manage your property portfolio.
Both your tenants and your key stakeholders need to know they can trust your business to work with reliable, financially stable service providers who deliver on time and to a good standard. There are so many companies who have experienced failed projects and financial loss because they didn’t check the financial status of their service providers.
What is an example of a service provider who was financially unstable?
Let’s take Carillion as an example of a service provider who was financially unstable.
Carillion was one of the biggest construction firms in the UK, known for their work in the public sector. They worked on many high profile, landmark projects including the Tate Modern Museum and the Royal Opera House.
However, in January 2018, they went bust.
At this time, Carillion were in the process of building two new hospitals in Merseyside and the West Midlands. Their demise delayed both these projects, meaning that these buildings stood unfinished for more than two years. This forced the government to step in and provide funding to complete these projects.
Overall, Carillion were working on around 450 public sector contracts when they entered compulsory liquidation. This collapse had a major domino effect, causing projects to be postponed with escalated costs. Over £2bn was owed to 30,000 of their service providers and it’s thought that Carillion cost the taxpayer approximately £150m.
In addition to the entire workforce being made redundant, it’s estimated that more than 75,000 people working in Carillion’s supply chain were affected by their demise. Carillion has become the perfect cautionary tale to stress the importance of checking the financial status of the businesses you work with.
Just because a company appears to be doing well from the outside, doesn’t mean there aren’t financial problems on the inside. The impact of not checking your service providers’ finances could be devastating for you, your business and everyone in your supply chain.
Do you need to check the financial status of your current service providers?
The short answer is yes.
Although your service providers might have been financially stable when you first started work with them, that’s no guarantee that they’re in the same position now.
The financial status of your current providers could change at any minute which means you always need to stay informed. Even if you’ve worked with the same service provider for years, they’re unlikely to tell you if they’re not financially stable. So, you need to find an easy way to stay informed about who you’re working with.
Where can you check the financial status of your service providers?
To build a clearer picture about the state of your service providers’ finances, you’ll need to do some research.
This can often be a time-consuming process as you’ll have to trawl through documents on Companies House and other online resources to get the answers you’re looking for.
Even if you do find these financial documents, you still need an expert to analyse the data. Without having someone to help you understand this information, you can’t be sure that your service providers are financially stable. This also requires a lot of manpower as you’ll have to check these documents regularly to ensure nothing has changed.
Ask yourself: do you really have the time to do this successfully?
Instead of wasting time doing all this research manually, why not simplify the process with Prosure360? Prosure360 gives you real time data, so you can immediately see an up-to-date analysis of your service providers. This makes it easy to keep track of the financial status of your service providers. This will save you time and allow you to focus on the things that matter in your business.
How can Prosure360 help you manage your service providers?
Prosure360 allows you to easily see the financial status of your service providers in an accessible, readable format. This intuitive platform means you don’t have to be a specialist to understand the complex financial situation of your service providers. It removes single points of failure by hosting all the information relating to your service providers in one safe place.
Prosure360 requires service providers to upload accurate data, ensuring it comes from a viable source. It shows their insurances, professional memberships, services, and of course, their financial status.
Using a red flag alert system, we give the service providers a risk score of gold, silver, bronze, or amber. This allows you to see your service providers’ performance and make an educated choice about whether to work with them.
Choosing the right suppliers and service providers for your business is essential in maintaining the reputation and integrity of your business. That’s why we give you everything you need to empower you to make the right choice for your company.
Protect your business and learn more about the financial health of your service providers with Prosure360-
Get in touch with Matt Bown and book a demo today!