As companies begin to recover after the economic crisis, they need to remain financially sound. To do this they should review the credit risks within their supply chain. An article
from Mary Ellen Biery, a Research Specialist from the financial information company Sageworks
, looks at this risk and identifies four types of businesses that pose threats to the supply chain if not properly evaluated. Biery recognizes four areas where companies should perform financial due diligence; suppliers, distributors, customers, and their own.
The financial stability of suppliers is an issue for all purchasing
departments. Companies need to ensure the supply of material and suppliers that have financial issues could become unreliable. Performing credit checks on customers is very necessary in order to ensure that a customer is able to pay for finished goods. A good practice is to run a credit check each time an order is received.
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