Why assess customer credit risk?

Extending trade credit supports business development, but it also exposes suppliers to late payments and bad debts. A structured assessment of a customer's creditworthiness helps balance commercial opportunities with acceptable risk.

Credit scoring is a practical way to make this assessment more consistent. It brings together different indicators and produces a rating that can inform decisions on customer credit analysis, credit limits, payment terms and guarantees.

How does customer credit scoring work?

The method assigns weights to relevant indicators and combines them into an overall assessment. The original Credit Notation approach considers a range of financial, legal and behavioural factors, including:

Financial information can be analysed further through the guides on profit and loss statements, balance sheets and key financial ratios.

How to interpret credit ratings

The Credit Notation method groups customers into four broad risk categories. These categories provide a common language for sales, finance and credit management teams.

These descriptions are indicative rather than universal definitions of default probability. A weak score should prompt further investigation, not an automatic conclusion that a company is about to fail.

Turn credit scores into practical decisions

The purpose of scoring is not merely to assign a grade. It is to help determine the most appropriate commercial and financial conditions for each customer.

• Credit limits: use the rating alongside expected sales, financial capacity, payment terms and current exposure.
• Payment terms: adjust the level and duration of credit to the risk accepted by the supplier.
• Risk mitigation: consider deposits, bank guarantees, credit insurance or other appropriate protections.
• Monitoring: reassess customers when financial information, payment behaviour or order patterns change.
• Collections: adapt preventive follow-up and collection priorities to the customer's situation.

A rating is therefore one input into the overall credit decision, not a substitute for commercial context or expert assessment.

What if the customer does not provide financial statements?

Some private companies do not publish detailed financial statements or are reluctant to share them with suppliers. Disclosure practices vary across jurisdictions and businesses.

In such cases, a simplified scoring model can draw on available indicators such as payment history, company age, commercial relationship, order trends and relevant external information. However, the absence of financial statements reduces the certainty of the assessment and should be acknowledged explicitly.

Credit managers should distinguish between missing information and evidence of financial weakness. These are not the same thing.

Try the online credit scoring tools

The tools may require an account to calculate and save results. Review the methodology and configure criteria where available.

Customer credit scoring in My DSO Manager

My DSO Manager integrates credit assessment into broader credit management and accounts receivable processes. Its scoring criteria can be adapted to a company's credit policy and customer portfolio.

Combining credit assessment with receivables monitoring, collection activities and dispute management helps teams translate risk information into coordinated action while supporting customer relationships.

Explore the online demo.