The Cost of Blind Trust: Why FIRST, VERIFY’s Financial Analytics is Essential for Subcontractor Prequalification

Beyond the COI: Protecting Your Projects from Financial Failure

In the capital-intensive world of commercial construction, safety compliance is paramount. However, organizations that focus solely on subcontractor safety records and certificates of insurance are overlooking a hidden risk that can derail major projects and hit the balance sheet directly: financial instability.

What happens when a critical subcontractor runs out of working capital, defaults on a loan, or files for bankruptcy mid-project? The consequence is immediate: costly delays, project overruns, and the expense of emergency re-scoping and re-bidding. A financially unstable subcontractor is, by definition, an unacceptable operational risk. This is why satisfactory financial health must be a mandatory component of your third-party risk management program.

FIRST, VERIFY’s Financial Analytics module transforms this complex due diligence into a streamlined, data-driven decision, moving beyond simple checks to provide deep fiscal intelligence.

Component Feature Focus: Financial Analytics

The Financial Analytics module within FIRST, VERIFY provides authorized users—from Procurement to CFOs—with a clear, three-dimensional view of a contractor’s fiscal viability.

1. Data Collection and Verification for Accuracy

FIRST, VERIFY mandates that the subcontractor submits detailed Profit & Loss and Balance Sheet data covering the past three-year period (plus current YTD if more than six months after the last fiscal year end).

• Transparency: Authorized users can view the submitted data alongside the financial statements uploaded by the subcontractor to verify accuracy.
• Completeness: This historical data ensures that evaluation is based on a trend established by actual performance, not just a single snapshot in time.

2. Automated Ratio Analysis for Liquidity and Leverage

The platform instantly calculates and presents key financial ratios, eliminating manual spreadsheet work for

your finance team. These metrics provide powerful early warnings of financial distress:

A. Risk Category: Liquidity & Working Capital

• Key Ratios: Current Ratio, Quick Ratio, Backlog
• Risk Mitigated: Short-term cash flow failure leading to invoice holds or project stoppage.

B. Risk Category: Leverage

• Key Ratios: Debt-to-Equity, Debt-to-Asset Ratios
• Risk Mitigated: High dependency on debt that could make the subcontractor vulnerable to interest rate changes or credit market shifts.

C. Risk Category: Profitability

• Key Ratios: Net Profit Margin, Return on Assets
• Risk Mitigated: Unsustainable business models that threaten the long-term viability of the partnership.

3. The Ultimate Differentiator: Z-Score and Benchmarking

To provide actionable context, FIRST, VERIFY highlights its most valuable analytical features:

• Bankruptcy Predictor (Z-Score): Our system provides Z-Scores, a globally recognized weighted score used to predict the probability of corporate bankruptcy within a two-year period. This metric moves the conversation from if a subcontractor is financially strained to how likely they are to fail.
• Contextual Benchmarking: Our analytics are dynamic. FIRST, VERIFY displays three-year trends for each financial ratio, automatically comparing the sub against the average trend of all your other prequalified subs in that same trade category (e.g., Electrical, Pipefitting, HVAC, etc.).

This unparalleled feature allows Finance , Procurement, and Safety managers to instantly identify a subcontractor that is significantly underperforming its peers, enabling truly proactive risk mitigation.

From Risk to Operational Efficiency

By integrating financial stability checks alongside safety documentation, FIRST, VERIFY ensures you only onboard the most trustworthy partners, protecting your organization from financial loss and ensuring project continuity.

Stop relying on blind trust. Verify financial stability before the contract is signed. Schedule Your FIRST, VERIFY Financial Analytics Demo Today