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Why Not Get Financial Statements From Every Customer?
Michael C. Dennis, MBA, CBF

Business Credit Concepts
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One of the questions I am asked frequently is this: "If financial statements are so useful, why don't we request them from every customer?"

I think the answers to this question include:

  1. As a practical matter, you can't get this information from every customer. For example, creditors in certain industries rarely [if ever] request financial statements from customers. If you do, you will be seen as the oddball. This could be a source of major friction between you, the customer, the salesrep, and even your company's senior management.

  2. Requesting financial statements is not without risk. A small number of customers will react in unexpected ways to what otherwise is a routine request.

  3. Privately held companies are less likely to provide financial data to individual creditors... unless those creditors are owed a substantial amount of money.

  4. Many privately held companies only only provide financial information to Dun and Bradstreet®. Why? Because it cuts down on the number of times they have to send this information to potential suppliers, business partners and customers.

  5. Unsecured creditors often do not have the leverage needed to "extract" financial data from privately held customers.

  6. In a highly competitive industry, your management may be reluctant to allow such requests to go through.

If you request financial information, then:

  • Make your request appear routine.

  • Request updated data at least once a year. Outdated financial statements may be worse than having no financial visibility.

  • Always request a Balance Sheet, an Income Statement, a Cash Flow Statement and Notes to the Financial Statements. You will not always receive everything on your wish list, but you should ask anyway.

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