How to check a UK company before trading with it

Trading with a company is a broader commitment than lending to one. If you offer credit, the question is narrow and it is about money: will this business pay the invoice when it falls due. If you are agreeing to supply them, take them on as a supplier, sign a contract or build a line of your operation around them, the question is larger, because you are choosing to depend on them. A customer who pays late is an inconvenience you can price in, a supplier who stops answering the phone in the middle of a contract is a different order of problem.

Almost everything you need to make that judgement is already public. Every limited company in the UK files its registration details, its filing history, its accounts and its director record at Companies House, and none of it costs anything to read. What the register does not do is interpret any of it for you, which is why most people either skip the check entirely or pay an agency for a verdict they cannot see the workings of. What follows is what to look at, in the order worth looking at it, and what each thing actually tells you.

Start by confirming the company exists and is still trading

Search the company on the Companies House register by name or by company number, and read the status line before anything else. Active is what you want to see. Anything else is a reason to stop and ask a question before you go further. A company in liquidation or administration is being wound up or rescued and is not in a position to take on new commitments. A company marked for strike off is on its way to being dissolved, sometimes because it has stopped trading and sometimes because a creditor or Companies House has taken action, and we have written separately about what a strike off notice actually means. A dissolved company no longer legally exists, so a contract with it is a contract with nobody.

While you are on the register, check that the company in front of you is the company you have been talking to. Confirm the registered office, the company number and the incorporation date against whatever you were given, because similar or near-identical names are extremely common and the wrong one is easy to look up by accident. A company incorporated a few weeks ago with a name closely resembling an established business is a specific pattern worth pausing on rather than a coincidence.

The filing history tells you how the company behaves

The filing history is the part most people scroll straight past, and it is the part that tells you about conduct rather than about numbers. Every company has legal deadlines for filing its accounts and its confirmation statement, and the register records exactly when each was filed and whether it was late. This matters because filing on time is the easiest obligation a company has. It costs nothing, it is known about a year in advance, and it requires only that somebody is paying attention.

A single late filing in an otherwise clean decade is a bad month rather than a pattern, a run of late filings is different, because it says either that nobody is minding the administration or that the accounts were not ready. Overdue accounts with no explanation are the strongest version of this signal. If a company has not filed when it should have, you are being asked to commit to a business whose most recent financial position nobody outside it can see.

What to look for in the accounts before you agree to anything

Open the most recent set of accounts, and set your expectations before you do. Most small UK companies file under the small companies exemption, which means they lodge a balance sheet and leave the profit and loss account off the public record. There is often no revenue figure and no profit figure at all. This is where a great many checks are abandoned, and it should not be, because the readings that matter for whether a business can meet its obligations are on the balance sheet, which every company files however small it is.

The first reading is net assets, which is everything the company owns set against everything it owes. A positive figure means it owns more than it owes and has something to absorb a difficult year with. A negative figure means the liabilities have overtaken the business, and it owes more than it could repay even by selling everything it holds. The second reading is the current ratio, which sets cash and money owed to the company against the liabilities falling due within the next twelve months. Above 1 means the near-term resources cover the near-term bills, and below 1 means the bills are the larger number.

Read two years rather than one wherever you can. A single balance sheet is a photograph and two are a direction of travel, and the direction is usually more informative than the position. Net assets shrinking year on year, cash falling, or liabilities climbing while everything else stands still all tell you something a single snapshot cannot. For a trading relationship this matters more than it does for a one-off credit decision, because you are betting on where the company will be in a year rather than on whether one invoice clears.

• Does the company owe more than it owns?
• Can it cover the year’s bills, or is the current ratio below 1?
• Is the safety margin thin, with liabilities financing almost everything it holds?
• Is there a pattern of late filing rather than a single slip?
• Are several of these present at the same time?

That last question is the one that carries the weight. Any one of these on its own is common enough to mean very little. When we scored 100 UK companies that later went into insolvency, 74% showed two or more of these signs at once on the last accounts they filed while still trading, which means the accumulation was the failure profile and it was visible on the public record long before anything formally went wrong. The detail is in our backtest of 100 insolvencies.

Who is behind the company, and whether they should be

The director record shows who runs the company, how long they have been there, and what else they are or have been involved in. Long tenures and a stable board are reassuring. Short tenures, a churn of appointments and resignations, or a trail of dissolved companies behind the same names are the opposite, and are worth understanding before you commit rather than afterwards.

Companies House also publishes a register of disqualified directors, which is worth checking by name. A disqualification means a court or the Insolvency Service has decided somebody is unfit to be involved in running a company, and it is a matter of public record with the reason and the period attached. It is rare, and precisely because it is rare it is decisive when you find it.

One caution belongs here, because it runs against the intuition. In the same study of 100 failed companies, director stability was slightly better than average, and most were steady founder-run businesses with the same people in charge throughout. A familiar name who has been there for fifteen years tells you very little about the balance sheet underneath them. Use the director check to confirm a picture the numbers have already given you, not to talk yourself out of one.

What a scored report adds to reading it yourself

Everything above can be done by hand, and for a single important relationship it is well worth doing by hand. The difficulty is never one company. It is the tenth one, checked at the end of a busy week by somebody who did it slightly differently from the person who checked the first, with the same evidence in front of them and a different conclusion drawn from it. Consistency is where manual checking quietly fails, and inconsistency is what lets the bad one through.

It is also worth being clear about what a traditional credit agency score does, since that is the usual alternative. The score is a single proprietary verdict on a scale of the agency’s own, blended from inputs you are not shown and weighted by a method that is not published. You are handed a conclusion to trust rather than a picture to examine, and the moment a company is anything other than straightforward, the score is exactly where the nuance disappears. A business can carry a respectable number while its filed accounts already show two or more warning signs at once.

The useful middle ground is a scored judgement that shows its working: the same readings, applied the same way every time, with the evidence set out underneath so you can see why the conclusion is what it is and disagree with it where you have context the filings do not carry. If your question is narrower than this one and specifically about payment, the same public record answers how to check a company before extending credit, which covers the credit decision on its own terms.

The information was always on the public record. The hard part was never the data, it was knowing what to look at and looking at it the same way every time.

Reading the filings consistently is what an intelligent company check does for you. It reads the accounts a UK company has filed, runs these checks automatically, and returns a scored report with the warning signs, the balance sheet readings and the director assessment set out in plain words, with most analyses finishing in 60 to 90 seconds. If you are deciding whether to trade with a UK company and you would rather have the public record read for you than by you, you can run your first analysis at company-iq.co.uk.