Before you extend terms:
six checks on a new supplier

The short answer

Before you give a new supplier payment terms, run six checks on the public record: confirm the company's identity, read its last filed accounts, look at its filing behaviour, search the court records for judgments and petitions, check the charges register, and look at the directors. Together they take under an hour and cost nothing. They tell you whether the company pays its debts, whether its assets are already promised to a lender, and whether the people running it have left a trail of dead companies behind them.

A supplier failure hurts twice. You lose the service or goods you have paid for, and you lose the time it takes to find a replacement at short notice. Both losses are cheaper to avoid than to absorb, and every input you need is public.

Check 1: Confirm who you are dealing with

Identity

Start with the register entry for the legal entity, not the trading name on the invoice. Note the company number, the registered status, the incorporation date and the SIC code. Three things matter here. The company must be active: a dissolved or in-proposal entity cannot honour a contract. The age matters: a company incorporated eight months ago has no filed accounts and no track record, so it earns no credit, only prepayment. And the registered name must match the name on the contract and the bank details. A supplier trading under one name while contracting through a recently formed company with a similar name is a pattern worth walking away from.

Check 2: Read the last filed accounts

Accounts

Filed accounts show two numbers before any others: net assets and cash. Net assets are what is left for the owners if everything is sold and every creditor paid. A supplier whose net assets have fallen each year for three years is consuming itself, even if turnover is rising. Cash tells you whether it can pay this month's wages and this quarter's suppliers. A profitable company with no cash still fails.

Read the trend, not a single year. Five years of history shows the direction. Our guide on net assets explains how to read the figure properly, and how to spot risk in a set of accounts walks through the ratios that move first when a company gets into trouble.

Check 3: Look at filing behaviour

Filings

Companies must file accounts every year. A company that files late, files two years of accounts at once, or shortens its accounting period is telling you something, because the timing is chosen by the directors. Late filing costs a small penalty, so a company that accepts the penalty rather than showing its numbers is making a trade it would only make if the numbers were worse than the penalty. A missing set of accounts is not a gap in the record; it is a decision.

On a Black Flag Alert profile, overdue accounts raise a visible flag, and filing behaviour feeds the R-Score directly. See why a change of accounting period is a red flag for how that signal is read.

Check 4: Search the court records

Courts

Two court records matter for a supplier. A County Court Judgment is a court decision that the company owes money. Judgments stay on the record for six years unless paid within a month, and a string of unsatisfied CCJs is a supplier that does not pay even when a court tells it to. The CCJ guide covers how they are registered and how to read the amounts.

A winding-up petition is the serious one. A creditor asks the court to liquidate the company over an unpaid debt of £750 or more. An active petition overrides everything else you found in the first three checks: on Black Flag Alert it forces the risk rating to 10, Distressed, whatever the accounts say. See what happens after a winding-up petition is filed for the sequence that follows.

Check 5: Check the charges register

Charges

A charge is security a company grants over its assets, usually to a bank, in exchange for lending. The register of charges tells you whose money is already secured on the assets you are relying on. Two patterns deserve attention: a cluster of new charges in recent months means the company is raising secured funding now, which usually means it needs cash now; and a charge over all assets means that if the company fails, the secured lender is paid before you see anything. Where you sit in that queue is explained in who gets paid first in an insolvency.

Check 6: Look at the directors

People

The register lists every directorship a person holds or has held. A director with three dissolved companies behind them and a fresh one in front is not proof of anything, but it is a question you want answered before you extend credit rather than after. The pattern even has a name when the new company carries on the old one's trade: see what is a phoenix director. You are not judging character; you are counting exits.

Turn the answers into terms

Score the six checks and let the result set the payment terms, not the other way round. Clean record, five years of stable accounts, no court activity: normal terms are defensible. Any court record, or falling net assets: shorten the terms, cap the exposure, or ask for payment on delivery. Active petition or unsatisfied CCJs: prepayment only. A Black Flag Alert profile carries a suggested credit exposure alongside the score, and the credit check guide lists everything a full check should return.

How often to recheck

A check is a photograph, and companies change. A supplier that was clean at onboarding can pick up a CCJ or a charge in any month that follows. The workable answer is monitoring rather than repeat manual checks: a watchlist that alerts when a supplier files late accounts, takes a new charge, or picks up court activity. On Black Flag Alert, watchlists and alerts are part of the free core.