In order to protect yourself from untrustworthy business partners, verify the counterparty before making a deal. Assess its creditworthiness, financial stability, and responsibility to its partners.

Why is Counterparty Verification Needed?

To prevent financial losses. If the partner works on a prepaid basis, no one guarantees that you will receive the product / service after transferring money to their account. Another example is when an unverified company is a customer, you run the risk of providing the product / service without getting paid.

To minimize tax risks. Minimizing the risk of remaining without a tax deduction or a reduced tax rate. Working with a fraudulent counterparty leads to issues with relevant authorities as well as to additional tax liabilities and fines.

To save reputation. Cooperation with an unreliable company leads to issues with finding new partners and negotiation difficulties. It also hinders business development and destroys the company's corporate image.

To avoid sanctions. Choosing the wrong counterparty can limit the area of the business and lead to penalties.

To eliminate the risks of cooperation with fraudulent companies / bankrupts. Working with a fly-by-night counterparty, or a company that goes through a bankruptcy procedure or doesn’t exist at all (only on paper), you will lose your time and money.

To find out the counterparty’s partners. If a counterparty has large and reliable companies-partners, then you can trust it. In case of their lack, the counterparty’s reputation should be studied more attentively.

When Is It Needed?

Verification is never a bad choice. However, it is vital in the following cases:

Making the first deal with a counterparty
You do not know what to expect from the company. A verification will help you to gain a general impression of a possible partner and will allow you to make the right decision: to agree for cooperation or to find another partner.
The partner company is recently registered
There’s nothing wrong with dealing with market newcomers. The bad news is if the company was registered a week ago only to receive money and disappear. Gather as much information about the future partner as possible in order to avoid such possibility.
The company operates on a prepaid basis.
It can be suspicious. If it’s not the first cooperation with the company, you can trust it. In another scenario, the verification of the company is mandatory.
Bad feedback about the work of the counterparty
A good decision is to refuse to cooperate at all. However, situations can be different. Even if the company has already remedied everything, do not neglect to verify it. This will help you to save your reputation, nerves, time, and money.

Who Needs It?

Everyone who wants to save their money. Individual entrepreneurs, representatives of large companies, private businessmen, investors, marketers, lenders, top managers, etc.

How A "Troubled" Counterparty Can be Dangerous: Real Examples.

Example 1:
During the tax audit, some issues with the supply contracts of one company were found. As a result, the company was fined one million dollars and an additional $500,000 of taxes were accrued. The company filed a lawsuit.
The court ruled in favor of the tax inspectorate because the company's counterparty was not at the specified legal address and the documents were signed by the people who weren’t authorized to do so. If the company had verified its counterparty before making the deal, it would have saved $1.5 million.
Example 2:
A company found a counterparty which worked on a prepaid basis. The company transferred $100,000 to the counterparty’s account, but the prepaid product was never delivered. After the subsequent verification, it turned out that the company-counterparty had been founded 12 days ago. Obtaining undue benefits was the main purpose of the counterparty.
Example 3:
The company gained a revenue of one million dollars. $700,000 of the funds were to pay for transportation, rent, and raw materials. The company representatives calculated that the tax base was $300,000, so the taxes were paid from this amount.
However, the tax inspectorate did not agree with the amount of the tax base. They checked the documents and proved the dishonesty of the supplier. Thus, the new tax base was recalculated to $600,000. Because of the unreliable counterparty, the company had to pay twice as much.

Ways Of Verification

You can verify the company on your own, involve third-party specialists, or use the Datapo service.

Way of Verification

Pros («+»)

Cons («-»)

Own verification

Cheap or even free, if you do everything by yourself.

Opportunity to “test” the future counterparty and assess its potential. This will help to make the right decision about the cooperation.

Time consuming. To get all the necessary information without anyone’s assistance, it will take more than one week.

Errors. Due to the fact that you will have to manually handle large amounts of information, it is impossible to completely eliminate the errors in the data.

Third-party specialists

Fast. If it’s a professional, they will collect the necessary information as soon as possible and provide you with detailed reports as well as their recommendations.

Little room for mistakes. Such companies do their job very well, so the error possibility is minimal.

Expensive. Good specialists cost a lot. Be prepared to overpay for what you could do without anyone's help.

It is difficult to find good specialists. Even if you find a company that agrees to verify your counterparty, it’s not a fact that you will receive accurate and objective research results.

Datapo.com

Convenient. You won’t have to request the necessary information through the secretaries of many different instances. All the necessary data is collected in one place: our website. You can get the data without leaving your own home or office.

Cost effectively. You won’t have to spend money to pay employees who will be engaged in verification. All work can be done independently.

Anytime. Information on the website is available 24/7.

Fast. Select the required reports and export them to a single file with a single click. Use the data obtained for analysis, comparison, planning.

It takes time to figure out how the service works. However, it doesn’t take much.

It is very convenient to use Datapo. Now we will take a closer look at how to use the service.

What And How To Verify

Company name

Make sure that the company has the same name: actual and legal which is registered in the documents. If its representatives reported that the company is named “Company A” while in fact it is registered as “Company B” it’s a reason for concern..

Also, pay attention to the history the company’s names. If its name was changed many times, you need to clarify the reasons for it. Perhaps, the company’s representatives tried to get rid of their bad reputation, so they decided to carry out their activities under a new name.

Line of Business

It is suspicious when a concrete supply company wants to organize children's parties. If this is your case, it’s better to look for a new counterparty.

Also, take into account the areas of services that a possible partner provides. A large variety of activities is the main sign of an unreliable company that is used to transfer money back and forth.

Tax Number / Insurance number

Use this data to verify how properly the company makes tax and insurance payments. If they have ceased to make them, it means that the company has frozen its activities.

Information About The CEO/ Founder

Make sure that:

The office terms of the counterparty’s representative have not expired;
CEO’s powers are not limited by the company’s charter;
The head of the company is not listed in the disqualified persons register and they can conduct business activities.

Additionally, you can check information about people who refused through the court to lead a potential partner.

If the contract is signed by an unauthorized person, the contract will be declared invalid and you will be in a lot of trouble.

You can also check if the company-counterparty’s representative is involved in other companies. If his information appears in various organizations, it is a reason to worry. There are situations when dishonest people pay someone to be listed as the CEO of many different companies.

Legal Data

Verify the date of registration, legal and postal address, correct company name, phone numbers, email address.

If the company was founded a week ago, it potentially could be a fraud company. However, it does not mean that you should always avoid young companies; you just need to verify them thoroughly.

Company addresses

Compare legal and mailing addresses. Notice how often they change them. Match the actual location of the company with its legal address. If the company is located in Amsterdam, and is registered somewhere in London, you need to understand the reason.

You should also pay attention to how many companies are registered to the same address. There is a chance of fraudulent activity. However, it does not directly confirm the unreliability of the counterparty. But in case something happens it could be difficult to contact the representatives of the company.

Debts

Loans. Check counterparty’s outstanding loans and what is their amount. How well does the company pay its debts and how often do delays occur. How much more time is needed to fully repay the loan.
Mortgages. Similar situation. Try to find out why the mortgage was issued, find certificates of commercial property owned by the company.

Supply Information

Check the deals in which the possible counterparty participated. Try to determine how well the company fulfilled its obligations. Look at the feedback from their customers. Examine the latest signed contracts, pay attention to the company’s bidding.

Financial Transactions Data

Pay attention to the granted / received grants, contributions, or investments. Such data will help to determine the overall financial position within the company, and assess its level of solvency.

Additionally, read the financial statements, so you will know how much the company earned, how much it lost, whether it makes profit or suffers loses. Profitable company is a sign of development which means that the company is moving in the right direction. Such counterparties can be trusted.

Court Cases

It does not matter whether the company was the claimant or the defendant. If the counterparty’s name appears in such proceedings, this can turn into a serious problem for you. Do not forget to pay attention to the subject of the dispute and how your potential partner’s cases were resolved.

Liquidation Information

Make sure that the potential counterparty is not going through the liquidation or bankruptcy process. The activities of the company which is going through liquidation proceedings are automatically suspended. It is impossible to work with such a counterparty, because it does not have the right to make any deals.

It is also very dangerous to cooperate with a potential bankrupt. The situation inside the company may stabilize, but it’s better not to take such risk.

Authorized capital, stocks, financial statements

Compare all this data to create a general picture of the financial activities of the counterparty. Pay attention share capital amount and the value of the company's shares. If the company positions itself as a large counterparty, but the amount of its capital is $5,000, there is a reason of concern.

Check out the financial reports for the past few years. Find out how much money is in circulation, what the profits or losses are, and the amount of assets.

The Latest Events In The Company

Study all the latest events that have occurred inside the company. Do not neglect to check any activities: new transactions, real estate, new managers, new loan, etc.

Try to bring the obtained information together to make the most objective picture of a possible counterparty.

Based on the verification results, make thorough analysis in order to draw correct conclusions and make one of the following decisions:

If the verification has confirmed the good faith and reliability of the partner, make a deal with the counterparty;
If high potential risks were discovered, refuse to make a deal;
Agree to make a deal, but change its terms in order to reduce the possible risks.

Matters of Concern: 7 Signs of a Troubled Counterparty

It’s better not to take any risks in the following cases:

Sign 1. Company appears to be rather inactive
The company doesn’t have licenses, movable or immovable property, very little is known about it on the market and in the network. The company doesn’t conduct transactions and doesn’t appear to pay taxes, doesn’t participate in trading, and/or doesn’t receive or provide loans. It is almost impossible to gather a lot of information about such a company, so do not take the risk and find other counterparty.
Sign 2. Company changes its names frequently
It could be that the name change is prompted by the marketing strategy, a new top manager, or a new business line. However, it is also possible that the company wants to hide its bad reputation.
Sign 3. Company involved in many court cases
If someone often sues the company, it’s obviously better to avoid deals with it. If the company often sues somebody, do not rush to sign the contract as well. This may indicate the conflict nature of its leadership or unwillingness to find a compromise in disputable situations. If you want to keep your nerves, look for another counterparty.
Sign 4. Company is "Invisible"
The counterparty’s office is not at the specified legal address and nothing is known about the location of the company's warehouses and production facilities. Moreover, it’s impossible to obtain location information from open sources or the obtained information does not correspond to reality. It all means that the counterparty has something to hide.
Sign 5. Company doesn’t have contact information about its leaders, representatives, authorized persons.
It’s a similar situation. Openness inspires confidence and vice versa. If in any way, a possible counterparty is trying to hide from prying eyes, there’s no need to take risks.
Sign 6. Company Offers Suspicious Contract Terms
Long-term deferred payments, payments through some third parties, delivery terms of large quantities of goods without a guarantee or prepayment. If the counterparty is as a supplier, be careful with making any prepayments.
Sign 7. Company is recently found
Recently founded companies are a high-risk area. The risk is not only in possible fraud, but also in the fact that new companies are unreliable. According to statistics, every third company which is younger than a year ceases to exist.

Why You Can Trust Us

Only relevant information

Data is constantly updated. For example, if a company took a new loan or invested in a promising project, our users will know about it. In order to be kept up to date, you can activate the information service which will automatically send you custom messages, so you will learn about any changes that involve your possible counterparty. Outdated information is not erased, so you can track the dynamics and the history of the company, which will help you make the right decision.

Only accurate information

There are no discrepancies in the provided information because we perform its validation using several parameters at the same time: the company name, postal code, city, etc. This eliminates the situation when you can confuse two different companies with the same name.

24 hour access

Request the necessary data at any time. You won’t have to wait for the next morning to go to the municipal reception office and request information about registration or the work of the counterparty. You can get a detailed report without leaving your house or office.

Ease of use

All information about the counterparty is divided into different columns: legal data, transactions, patents, real estate, transport, licenses, etc. This facilitates the search process and makes it as clear as possible. You can also search for information about the counterparty by company name, founder, contact information of its head, member of the collective management body.

The obtained data can be easily exported to a separate file which makes it a lot easier to work with it: analyze, compare, and draw conclusions.

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