ECONOMIC FINANCIAL STANDING – WHAT YOU NEED TO KNOW

Economic financial standing is primarily established through annual turnover, financial ratios and their level of insurances.

This is typically assessed on a PQQ but can easily translate to more formal tender procedures.

CLICK HERE for an overview of the basics to a PQQ.

This is one of the two ways to assess the suitability of the supplier and to pursue a specific activity/contract – the other being the technical and professional capability.

Your economic financial standing reflects multiple financial aspects of your business. Three being:

• Annual turnover – you need to usually attach your most recent audited/unaudited accounts
• Financial ratios – this is usually found in your full financial accounts and can include the ratio of your assets to liabilities (acid-tests / quick ratios)
• Your insurance[s] – you usually need to attach your Insurance documents and commit to potentially increasing your amounts before contract commencement.

One of the key things a lot of our clients assume when they start tendering is their ambitions will become reality almost immediately, especially in terms of finance. You cannot have your turnover increase within the first year to that 7-figure amount we all desire. This is as rare as blood diamonds on a blue moon.

As per a new requirement introduced in the 2014 Public Procurement Directive, “the minimum yearly turnover that economic operators are required to have may not exceed twice the estimated contract value unless there are specific circumstances which justify a higher level.” This means if you’re turning over £100,000 per year, the most you can typically bid for, based on your economic financial standing, will be £50,000, unless there are specific circumstances which may justify this – going over this amount, we’ve found, is extremely rare and will only increase slightly – not massively. We encourage you to aim for opportunities that are half your turnover or lower.

In a nutshell, make sure your finance is in order, so the above attachments maximise your chances to passing to the subsequent stage, not hinder your overall efforts!

Need further advice in filling out PQQs? Get in touch with our Tender Consultants.

We’re here to help you succeed!