1. Confirm identity and registration
Match legal name, registration number, registered address and status against the official company register in the right country.
Checklist
Eight checks to run before you extend terms, ship goods, sign a contract or send funds to a new trading partner anywhere in the world.
How much diligence you need depends on the exposure. A small first order on prepayment needs a light check. A six-figure shipment on open account, or a long-term exclusive agreement, needs all eight steps below and probably some professional advice.
Work through the list in order. The early steps are quick and eliminate most obvious problems. The later steps cost more time and money, so you only spend them on counterparties that pass the first ones.
The checklist
Eight steps before you trade
2. Understand ownership and control
Know who owns and controls the business, especially where payment or goods may involve related parties.
3. Screen sanctions and watchlists
Check the company, its owners and the goods and destinations involved against the lists that apply to you. This is a legal obligation in many jurisdictions.
4. Review financial standing
Credit reports, filed accounts or bank references show whether the company can meet the size of the deal.
5. Check independent trade references
Verified references from other trading partners show real payment and delivery behaviour, which financial data alone does not.
6. Choose payment terms to match the risk
Consider prepayment, letters of credit, documentary collections or insurance for higher exposures, and open account only where the record supports it.
7. Review the documents
Check that contract party names, addresses, bank details and incoterms line up across the contract, invoice and shipping documents.
8. Keep monitoring
Counterparties change. Re-check before large new orders and watch for late payments, new payment instructions and requests to change terms.
Process
Make it routine
- 1
Set a threshold
Decide the order size or payment term above which every counterparty must pass the full checklist.
- 2
Record the result
Keep a short note and the documents for each check so a decision can be explained later.
- 3
Review regularly
Repeat the key checks for repeat customers and suppliers on a schedule, not only when something goes wrong.
Frequently asked questions
No. It is general information for businesses. Sanctions, anti-corruption and know-your-customer obligations vary by country and industry, so confirm what applies to you with qualified advisers.
Related guides
Know who you’re trading with before you commit.
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