Company background check can help SMEs: experts

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Namrata Kath Hazarika | 21 Jul, 2008
SMEs are sometimes wary about dealing with the clients. Small entrepreneurs think that the best way to deal with this burden is to go for a thorough background check.

"It is shocking to know that in the business world there are number of business dealers who are into fraudulent practices. We need to detect the culprit. But how we can book them is the main question. In this case, we have to be thorough about our field of activities," says Ashok Lav, Managing Director of Aster Softtech India.

"Suppose in an IT company I have to have good knowledge of the sector. Only than I will be able to come across authentic persons. If I am aware of my potential buyers and sellers, within no time I will be able to know the credentials of the person," he added.

"In fact, there are varied actions that can be put to work to detect fraudsters. You can either do a detailed research in order to find out the company's background, if you want to lessen the risk of being subjected to some business misunderstanding or fraudulent transactions," says R.S. Jagdev, Chief Co-ordinator of Probe Intelligence Services, a background check firm.

"It is very important to fix a meeting with the business partner personally and have a glimpse on the company's facilities," Vinod Makar, Proprietor of a New Delhi-based firm Arts-n-Crafts.

"As a buyer if somebody is willing to trace whether the company is genuine, than ask the party to send you some samples before making any commitment for purchase. This will be helpful in knowing the quality of the products you will be buying and will be easy for a you to decide whether the products meet your expectations or not," he says.

"On the other hand, as a seller you can ask the buyer to give you the payment of the sample and the shipping cost at first. After this requirements are fulfilled then proceed for any business dealings. This kind of cases are applicable especially for the products that has very high resale value," he says.

"Moreover, if you are a buyer and want to escape from poor quality than you can order a pre-shipment inspection of the products. On the other hand, if you are a seller and have not been in touch with your business partner for a long time then avoid selling the products on open account. It would be better if the seller ask the buyer to present their open letter of credit," he added.

"For instance, there are number of small entrepreneurs who are owners of their respective companies. They have constructed their offices in a posh locality of the city blended with sound infrastructure and articulate interior. Suppose a businessman has gone to visit the office for any kind of business dealings, it is for sure the beautiful surroundings will entice the persons at the first move. Thereby helping the customer to know about the authenticity of company," says Ashok Lav.

"Here, the businessman meets the director or any head of the company, had a good conversation and finalized the business deal as well. After few days the buyer comes across some fraud case like either the payment was not cleared on time or the company disappeared…anything is possible. Now, here it was important for the buyer to go for a background check before he commits anything."

"He should have been much more careful before making any business decisions," he says.

Background check is vital for both online and off line trading, which will make one’s business decision more secure and safe.

When asked about the strategy his company follows for business background check, R.S. Jagdev told SME Times that when a particular company wants to research the background of their business partner, I make sure to know what information they exactly require in order to ensure that the company is the real one to go ahead with any kind of business dealings. In business background check we try to find out the solution to these kind of problems. Business background check helps owners to find out whether the company pays its taxes on time. Have they ever been into business malpractices? What are the work ethics of the company? How do they treat employees working with the company? Do they have proper licensing for conducting business?

"The basic criteria that we follow to do the background check is we initiate an extensive research on the ownership of the company, family background, the party's business interest and dealings, financial strength such as whether its balance sheets and income tax clearance are being up to date, vehicles owned by the owner is authentic, credit information such as bankers name, whether bank certificate sent to the financial institutions are genuine, etc."

"We also try to ensure whether the company is involved in any litigation, If so, we try to find the details of unsettled claims, amount of income or sale tax paid by the company. We try to find details of any record the company possess on bankruptcy," he says.

"We also try to trace the owner's nature and character vis-a-vis employees, with government or local authorities."

"Infrastructure is another aspect we throw light on such as number and level of manpower, number of retailers, area covered, name of nearby towns, plans for future expansion, godowns - its location, capacity, etc."

"Furthermore, we ensure to track the company's market reputation, once we detect all these, we analyze and prepare a report on the same," he added.

"It is tough to be always alert, but in today’s scenario when the world has become corrupt we need to think beyond simple business in order to escape from any unwanted circumstances, So, be extra careful and do background check thoroughly of your business partner before making any business dealings," he added at length.