The Oxford English Dictionary provides two definitions for due diligence and both are very important to you and your business.
Firstly, due diligence is defined as reasonable steps taken by a person or an organisation to avoid committing a wrongful act or an offence. This is true for most companies, but mainly for companies in the financial sector and multinationals. It means you need to ensure that your customers, vendors, or suppliers are honest and sincere and the money you are paying is not going to end up being used for criminal activity or in the hands of terrorists. You also need to ensure the money you are being paid is not the ill-gotten gains of shady dealings.
Secondly, due diligence is defined as a careful investigation of the state of a business by a person or organisation that is thinking of buying it or investing in it. We can broaden this to include doing your homework on a new customer’s state of business before making capital expenditures to fulfil a large order that could leave you in trouble if they don’t pay, and knowing your service providers are able to deliver before signing that big contract.