The Wall Street Journal recently reported on an increasing number of companies headed for bankruptcy that are disclosing their situation and intentions publicly. This practice was unheard of in the past, when a company did anything in their power to appear healthy and viable. The Journal attributes this change to the difficult financing environment.

“Financing for reorganizations is in short supply, which is forcing companies to disclose their woes before they have a completed plan to restructure. Others are using the disclosures more strategically, as leverage to squeeze concessions from creditors.”

But with the exception of some of the large companies in the Journal’s reporting and the public pleas for help from the auto suppliers, few companies are on record with their customers or the companies they supply with their financial straights and survival runway.

So as a buyer, you simply cannot expect your current and potential suppliers to be forthcoming about their situation. Instead, it’s critically important to be out in front of potential problems. Reacting to bad news is never a position of strength. So if you aren’t already, you need to assess your current and potential suppliers to know they aren’t going to go under within the next few months.

Although this is list is by no means exhaustive, here are some basic questions you need to ask.

• Does your supplier have a business plan? If not, does that make you comfortable doing business with them? If so, when was the last time you reviewed or discussed with them?
• When was the last time your supplier did anything that could be considered innovative?
• Is there staff turnover? Staff reductions?
• Are you waiting longer for payments?
• Are they experiencing rising debt and slowing growth?

These kind of probing questions can be uncomfortable, but not as uncomfortable as a key supplier suddenly going under. And although their answers may point to potential problems, they’re by no means a reason to immediately cut bait and find another supplier. In fact many issues, such as supplier liquidity, can be solved through collaboration. The important thing is to get a good, honest assessment of where things currently stand so that at the end of the day … you’re still standing.

Katie Siegle is a Senior Consultant in Ariba’s Spend Management Services group. Katie works with global manufacturers on international sourcing and procurement projects.