Assess your customers

All profitable business relationships require a balance resulting in respect of mutual commitments.

If delivery of equipment or performing a service at a date and a price given is under the responsibility of the supplier, the invoices payment made at the contractual due dates belongs to the buyer.

It is therefore necessary to ensure ongoing capacity of your (new or regular) customers to honour their commitments either from a business ethics perspective or from a financial perspective (will your customer be able to pay your invoices ?).

Otherwise, the energy and investment that you employ to develop the business relationship may be lost and you could lose even more if your bills are not paid.

Assess the creditworthiness of its customers is essential before the beginning of the commercial relationship and throughout it.

This allows to deploy your marketing and commercial efforts with "good" prospects and then work serenely thereafter without risking unpaid invoices which is the cause of 25% of business failures!

Get paid for your sales is essential! For this purpose, you must before anything else assess the solvency of your customers.

This analysis must be done before the trade negotiation or when opening the account. Anticipation is important because it helps to prevent payment problems.

Main steps to assess creditworthiness of customers

This study, called credit analysis, takes into account a range of information related to the buyer, its environment and commercial stakes for your company. This analysis leads to a specific strategy with each customer and will have some effects on trade negotiations and commercial terms (payment terms, warranties, contract ... etc..).

You need first to get informations about your clients
Then analyse the profit and loss account and the balance sheet of your clients.
Assess the level of the Tangible Net Worth of the company which is a key indicator to set the credit limit.
Finally evaluate clients solvency with the credit notation

The next step is to set a limit of credit and business conditions (delay and means of payment ... etc).

The evaluation of the creditworthiness of its export customers is different because it is often difficult to obtain detailed financial information. Furthermore, the analysis must be larger and take into account the political risk of the country's economic and foreign exchange risk.

Next: get information about your clients

Tools download:

The credit analysis

Credit risk profile

Get information about your clients

Information request form

Information request letter

Information request form

Information request letter

Analyze the Profit and Loss account

Credit Notation

Articles on the same topic

Learn about its export customers
How to obtain information on the creditworthiness of its customers for export? What are the main differences with the domestic market?

tools to download

Credit risk profile