Financial position of any company is determined through analysis of key indicators and ratios. Main goal of financial analysis is to understand and determine the level of solvency of a counterparty. As a result it is easier to build strategy for interaction with a partner and make correct management decision.

Financial Director or Financial Analyst is responsible for conducting financial analysis. However, it is not always possible to turn to financial consulting specialists or maintain a staff of employees responsible only for checking financial position.

Quite often functions of Risk Manager are distributed among other managers, accountants or other company employees. Without proper knowledge, it is quite difficult to understand which indicators to check and what they indicate. But with the help of a proven express method, it will become much easier to assess financial position of counterparties.

In the July Newsletter, we will tell you what financial indicators are used in the express method, what they are responsible for and how to quickly check financial position of a counterparty using Globas.

Analysis of financial position is one of the most important stages when checking a counterparty.

The express method was developed by the experts of Information Agency Credinform and has proven its effectiveness in solving various cases.

Express method includes checking of:

Using this express method, you can get answers to the following questions:

Answers to these questions will provide a comprehensive picture of company's financial health.

Analysis of key financial figures allows us to evaluate company's performance over a certain period.

Key financial figures are:

• Revenue;
• Net profit (loss);
• Retained profit (uncovered loss);
• Net asset value.

Revenue shows the amount for which company's goods or services were sold. Revenue should increase from year to year. Stagnation or decline in this figure will have a negative impact on profit. The main reason is the irreducible level of administration and commercial costs, as well as inflation.

Net Profit (Loss) line reflects the final result of company's activities for the period. Presence of positive result shows how much money organization has earned and will determine level of business success. The higher the share of profit in the revenue is, the more successful is financial activity. This figure can also be negative. In this case, loss is recorded at the end of the financial period. Net loss is recorded when total expenses exceed company's income. If there is a sufficient amount of equity, the resulting difference is covered and losses are not carried over to the next period.

However, there are often cases when company’s activities generate an insufficient amount of equity and it is not possible to cover the resulting loss. In such cases, the amount of loss is reflected in the next period in the line Retained earnings (uncovered loss).

Retained earnings (uncovered loss) reflects remaining profit at the end of the year, or loss incurred in previous years, not covered by any additional sources. Retained earnings form company's equity; the larger it is, the higher is the level of self-sufficiency and autonomy from third-party loans. Therefore, uncovered loss, on the contrary, reduces amount of equity, since they are directed towards repayment. In such cases, level of dependence on borrowed funds is quite high.

Analysis of liquidity ratios allows you to assess the level of funds for repaying short-term liabilities.

Liquidity coverage ratio reflects ability of an organization to pay off short-term liabilities using current assets. Short-term liabilities are payments that company expects to make in the next 12 months. Compliance or non-compliance of this figure is regulated by a segment from 1 to 2. Therefore, if its value is below the recommended segment, it means that in the event of unforeseen circumstances, when an enterprise will need to pay off all obligations at once, it will not be able to fully pay off its short-term obligations at its own expense.

There may be cases when liquidity coverage ratio corresponds to the recommended values, but in fact its value is fictitious. This may happen due to the high share of accounts receivable in the structure of current assets. Accounts receivable are expected cash flows that are due in the next 1 to 36 months. Therefore, in fact there is no money, but according to the accounting rules, it should be reflected in company's balance sheet.

Solvency ratio allows us to assess company's dependence on external loans.

Solvency ratio must be greater than 0.5. This means that more than half of company's activities must be financed from company's own funds, and the lesser part from borrowed funds. Of course, ideally, organization's activities should be supported by its own funds, but untimely decisions on business expansion can lead to stagnation and loss of market share. Therefore, attracting borrowed funds when planned development is required will not negatively affect organization’s activities. However, their share of total assets should be closely monitored.

Indicator of the speed at which an organization repays its debts to suppliers and contractors. This ratio shows how many days it takes a company to pay off its creditors. Maturity date can be used to determine the financial position. The longer the repayment period is, the less stable is the financial position of organization.

Comparison of indicators allows us to assess situation in the industry and identify emerging trends. In most cases, financial indicators may take values lower than their recommended values. However, this does not mean that organization is experiencing problems with solvency or financial stability. Company shows results that are typical of the industry trend in which it operates. For example, the industry liquidity coverage ratio is 0.84, with recommended values from 1, and company's ratio is 0.85. When comparing two indicators, we determine that organization operates as the industry allows it. Therefore, the ratio is normal and in line with the practical value of the industry.

By going through each point of the methodology, you can get a clear understanding of financial position of a partner or potential counterparty. Key financial figures will show company's performance. Analysis of liquidity ratios will allow you to assess the level of working capital to pay off short-term liabilities. Solvency ratio will reveal company's dependence on external loans, and comparison of all indicators with the industry ones will show the current trend.

Information and Analytical System Globas allows you to conduct an in-depth examination of financial position of a counterparty, identify temporary loss of solvency and conduct broad analytics on all forms of accounting statements.

Globas has everything for high-quality financial analysis of a counterparty, including all indicators and ratios described in the express method. In addition, services of automatic assessment are available for quick verification: Analytical financial report and Globas indexes will always tell you about current position of a company.

Conflict of interest is an important and often overlooked issue that many businesses face. Conflict occurs when an employee's personal interests conflict with the company's interests, which can lead to unethical practices and corruption. Understanding how to identify and manage such conflicts is a key to maintaining a healthy work environment and business stability.

The first step in avoiding conflict of interest is to verify that a potential employee has their own business. This may include both direct and indirect ownership. Direct ownership means that the employee formally owns the business, while indirect ownership can be through beneficial ownership in other companies, or through trustees and relatives.

If there is direct or indirect participation in a legal entity, it is necessary to check the status of such organizations, whether they are in the process of liquidation, reorganization, bankruptcy or termination of activity. You should also check the person for being a shareholder or a manager in multiple entities. However, it is important to take into account that the Federal Tax Service does not currently maintain a register of companies that have a “manager in multiple entities” or a “shareholder in multiple entities” attribute. According to the Federal Tax Service, participation of a person in several legal entities in itself does not indicate a violation of legal requirements. In this case, it is recommended to study them separately to assess the risks when choosing counterparties.

You can check direct and indirect ownership, as well as establish connections between different persons using Globas. The Individual Profile provides detailed information about the requested person participating as a manager or a shareholder of legal entities as well as data on indirect beneficial ownership. And with the help of Links, Globas will help to clearly establish a chain of relationships between the requested person, his or her relatives and related parties.

When checking data on a person’s tax number (INN), you must perform the following steps:

Invalid or incorrect INN can lead to negative consequences for the company and its counterparties, especially if a potential employee is being considered for a management position.

Regular monitoring of employees’ self-employed status is necessary to avoid additional assessments of contributions and personal income tax. Self-employed employees may be unscrupulous, for example, they often do not provide checks. In such cases, you can contact the Federal Tax Service directly. In other controversial situations, you should apply to a Court of General Jurisdiction, since the Arbitration Court does not consider disputes with self-employed people.

These measures are taken to preserve the taxpayer's property, which can be used to pay off tax debt. If a potential employee has such restrictions, it may indicate financial problems or significant tax debts, which in turn may affect his or her reliability and business reputation.

This checking is necessary to obtain a complete picture of the financial condition and legal status of a potential employee. This data allows you to assess the possible risks associated with hiring and to understand how reliable and conscientious the candidate is. For example, significant debts or fines may indicate candidate's financial difficulties, which could negatively impact their performance and ability to make responsible decisions, while legal debts may indicate legal problems that could affect the company's reputation or create additional risks.

Globas allows you to check the tax number (INN) for invalidity, determine the status of a self-employed person, and also receive statements about the presence of interim measures, suspension of account transactions, tax and court debts, fines and state duties.

Checking arbitration cases, enforcement proceedings and cases in Courts of General Jurisdiction when hiring personnel is critical for the following reasons:

1. Identification of legal problems: Checking legal cases reveals whether a candidate is involved in legal disputes. These may include civil suits, commercial disputes and other legal proceedings that affect its work and reputation.

2. Financial reliability: Arbitration cases and enforcement proceedings often involve financial obligations, such as debts and outstanding loans, which may indicate financial instability of a candidate and potential risks for the company.

3. Ethics and integrity: Litigation, especially involving fraud, breach of contract, or other unethical practices, may indicate a candidate's lack of integrity.

4. Potential Conflicts of Interest: Candidate's participation in litigation may create conflict of interest, especially if the cases involve current or potential partners of the company. This situation may affect employee's impartial decision-making.

5. Reputational risks: Candidate's participation in legal disputes can negatively affect the company's reputation, especially if he or she holds a management position or is associated with key projects. Check allows you to avoid hiring employees who could damage the business reputation of the company.

In Globas you can order extracts of a person for the purpose of being wanted for enforcement proceedings or suspicion of committing crimes, check the existence of any enforcement proceedings, as well as study arbitration cases and general jurisdiction cases with the possibility of obtaining detailed information about each case and relevant court decisions.

Conducting such checks allows the company to make informed hiring decisions, reduce legal and financial risks, and maintain a high level of trust and transparency in the team.

Searching for information about an employee in official registers is also an important step in preventing conflicts of interest. Check is necessary to comply with a number of legal norms, primarily 115-FZ, to ensure security and reduce the company’s risks. Main lists and registers that are important to consider when conducting a check:

With Globas you can conduct a thorough check for the presence of the requested person in such lists, taking into account both the exact and possible matches of the person’s full name with the list.

One of the main tasks is to minimize the risks associated with conflict of interest when hiring new employees. To achieve this, it is important not only to carefully select and check candidates, but also to introduce systematic monitoring of existing employees.

Regular employee monitoring using Globas helps maintain transparency and quickly respond to changes that may indicate a conflict of interest. Creating lists to monitor key employees and setting up automatic alerts allows the employer to promptly identify potential risks and take the necessary measures.

Globas provides unique opportunities for searching and analyzing information about potential and current employees. Access to official registers and databases allows you to obtain reliable data on the business activities of individuals and legal entities, which makes the verification process more accurate and efficient. Globas allows you not only to identify direct connections between an employee and a business, but also to detect hidden interests that may pose a threat to the company.