Is your company privately held? Is it as yet unprofitable, but with forecasts calling for reaching cash flow break even within the next 6 to 18 months? Have company operations primarily been funded through the issuance of equity? Do investors or venture capitalists sit on your board of directors, help with your company's financial direction and dictate how information about your company is disseminated? The way you run your business – whether you show fiscal discipline or not – should be your business and no one else's, right? I mean, you're not a public company, so you don't have to provide financial statements to anyone you don't want to. Right? Think again!

There is a growing distrust in corporate America. Companies large and small that seek to do business with one another increasingly want to evaluate whether their partner will be in business six months after the deal is struck. The current economic situation in the U.S. does not stop commerce; it just necessitates knowing who you're doing business with and determining the potential risks of doing business with other companies. You don't want to agree to a multimillion dollar contract with a company without having some assurance that the company can pay its bills or, on the other side of the transaction, will remain in business long enough to provide, maintain and enhance the product or service. Due diligence usually involves assessing the financial viability of the company. When the company is publicly held, financial statements are easy to obtain on the Internet; and, quite often, equity analyst reports will also be available to help identify strengths and risks. However, when the company is privately held, the only option is to ask for financial statements directly from the company and perform an independent, high-level analysis of its viability.

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