A glossy website does not pay the wages, and neither does a list of contract wins, a wall of accreditation logos or a confident claim about national coverage. None of it tells you whether a business has the cash to meet Friday’s payroll.
Sadly, this is not a hypothetical concern. We are receiving calls from dog handlers who say they have not been paid, including reports of people walking off sites because their payments have not arrived. We are told contractors are carrying substantial unpaid invoices, while customers risk being left without the security provision they believed — and paid — to have in place.
When a security company does fail, the cost does not fall on the brand. It falls on the officers, the subcontractors and the customers left trying to protect people, premises or the public at little or no notice.
Business failure is of course sometimes unavoidable. Taking on obligations without the financial capacity to honour them is a very different matter indeed.
Today the Government announced measures to protect households from cowboy builders: an ‘Approved Code’ run by the Furniture and Home Improvement Ombudsman with the Chartered Trading Standards Institute, and Trusted Payments, which holds money and releases it as agreed stages of work are completed. The first traders will join the code by the end of September, with a full rollout in December.
It is a practical response to a familiar problem, and it raises a fair question: why do we wait until a business has failed before giving people the information they need to protect themselves?
Two things would help.
1. Do the checks yourself
First, do the checks yourself. Staff, contractors and customers should carry out basic financial due diligence before placing their livelihoods, money or security arrangements in a company’s hands, and repeat it annually and before any significant renewal. Companies House is free.
- Are accounts and confirmation statements filed on time?
- What does the balance sheet say?
- Are there registered charges, or frequent changes of directors?
- How many employees are disclosed, and does that figure resemble the operation described in the sales literature?
Look at who is named too. An “about us” page without identifiable directors, or one that presents a depth of team the accounts do not support, tells you something. Compare the names on the website with the directors on the register.
There may be an innocent explanation for any discrepancies — subcontracting, group structures, the age of the accounts. But an explanation should be sought, not ignored with one eye on the prize. Credit reports, insolvency notices and winding-up petitions matter too. A petition is not a finding of wrongdoing and does not mean a company will definitely be wound up, but it deserves rather more attention than another post celebrating continued growth. Where HMRC is the petitioner, the questions become even more pressing.
2. Build a central financial-resilience service
Secondly, Government should build a simple, central financial-resilience service for workers, contractors and customers. Experian Small Business and Creditsafe are useful, but a security officer or a small subcontractor does not have the access a major client enjoys, and should not need to be a financial analyst to judge whether a company appears capable of paying them. The service needn’t disclose anything commercially sensitive.
Verified company details, filing compliance, insolvency warnings and an independent indication of liquidity and working-capital resilience would answer the only question that matters: is this business filing what it should, paying what it owes, and holding enough financial headroom to survive a setback or rainy day?
Focus it where failure puts public safety at risk — the sectors already licensed or regulated for that reason, including private security, where frontline operatives are licensed by the SIA.
A sound business does not strip out every available pound in dividends and call itself profitable. It retains working capital, builds reserves and plans for the setback it hopes will never come. Six months’ trading capital will not be the right measure for every organisation, but any company entrusted with wages, essential services or public safety should be able to show prudent reserves and a credible contingency plan.
The Government — and the Rt Hon Jonathan Reynolds MP — is of course right to protect householders from cowboy builders. The same logic should now apply to financially fragile providers in critical sectors. By the time wages have been missed, contractors abandoned and officers withdrawn, the warning has come too late.
Andy Burnham has called these measures practical “everyday fixes”. A straightforward financial-resilience service for workers, contractors and customers would be another — and one worth making please.
Originally published on LinkedIn.