Insights |Risk Management

6th February 2023

How to track the financial health rating of suppliers

Managing risk while running a business can quickly turn into a menial task, however, keeping a hawk eye on the company balance sheet and cash flow can keep company finances in check.

Although, what about external risks posed to the business that are out of your control?

The financial health of your supply chain is interlinked with the health of your own business, as if you’re highly dependent on a small number of contracts and any of these businesses run into financial difficulty, your business could be at risk. Therefore, it’s crucial to spread the risk, rather than concentrate the risk on a small number of clients.

Guest author Karl Hodson of UK Business Finance, a commercial finance specialist, runs through how to track the financial health of businesses in your supply chain through a combination of methods, including assessing data available in the public domain, analysing behaviour, and using specialist software.

Credit risk management software

Specialist software designed for credit risk managers supplies data on thousands of UK businesses. From financial health ratings, red flags, and detailed analysis of risk levels, it’s worth investing in credit risk intelligence software to mitigate risk and protect your business.

Red Flag Alert is an example of industry-standard credit risk software that provides key financial indicators to forecast potential insolvency. You can connect real-time alerts straight to your inbox so you can be notified of any changes to ratings.

Companies House

Companies House is a public register which means that the information is publicly available. It’s the central database that houses information on all UK companies, most information is free, such as company information, details of active officers, previous company names and insolvency information.

If there’s an incoherent pattern of events, such as a wave of officer resignations and overdue documentation, this may raise a red flag. The Companies House profile will also show the company status, including whether there’s an active proposal to strike off which means that the company is set to close. If the business is due to strike off, raise any claims that you may have with the liquidator.

The Gazette

The Gazette is the UK’s official public record that holds information on companies, including insolvency notices. It provides a complete notice timeline, from the date the petition to wind up the company was issued and the winding up order was granted. You can track businesses in your supply chain to check that they’re not exposed to any legal action from creditors, such as a winding up petition. Keep a close eye on the businesses in your supply chain so you can track any potential insolvencies.

Creditors commonly issue a winding up petition as a final resort if they believe that the company is out of cash. If this is the case, you’ll want to reach out to the liquidator and submit any claims.


If there’s a change in behaviour, such as inconsistent payments, payment delays or requests to extend terms, this may indicate that the business is experiencing cash flow problems. If it’s temporary teething problems, they may turn to a cash injection or formal restructuring to remedy the problem, but if it’s a deep rooting issue, they may need to seek professional help from a licensed insolvency practitioner and enter an insolvency procedure.

It’s paramount to track the financial health of your supply chain as if one business collapses, this could jeopardise the way you deliver your service which could have a detrimental impact financially. There’s also a risk of bad debt which is when money owed to your business is unlikely to be paid, and therefore written off.

Supply chain risk management support from ESA Risk

For advice and support on supply chain risk management, contact us at, on +44 (0)843 515 8686 or via our contact form.


This article was written by guest author Karl Hodson of UK Business Finance.

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