Blog Risk & Credit

Why you should now pay particular attention to the payment behav-iour of your business partners

| March 31, 2020

In the meantime, already 180 countries report infections with the corona virus. Unlike other economic threats, a virus does not ac-cept borders and protectionism. In our thoroughly globalised world, characterised by international supply chains and worldwide trade, such a threat is even more challenging. Here we explain, why a de-tailed look at payment behaviour is a very good indicator.

Not a day goes by without new bad news and it is sometimes difficult to put the eco-nomic threat before the extent of human suffering. But realistically speaking, behind every economic impact there are people and fates. It is therefore all the more im-portant to place special emphasis on getting your company through this difficult crisis as unscathed as possible.

Uncertainties are unfortunately the order of the day in the current situation and the causal chains that extend across entire industries are not always foreseeable. Can your suppliers still deliver and your business partners still pay their invoices? A comprehen-sive credit assessment of your customers and suppliers is of course always the basis and early warning systems and global monitoring are essential to identify risks in good time and to counteract threats with suitable measures.

The determining entrepreneurial objective is always to keep an eye on the risk of bad debts. In addition to risk identification, an indispensable factor is continuous risk as-sessment and, in combination with established monitoring, critical changes in creditwor-thiness can be detected in good time. But what remains to be done when the topicality of the events turns upside down? State crisis packages and measures distort the pic-ture? In addition to risk assessments and the use of scoring models for risk prediction, there is an indicator that is more volatile and sensitive - the payment behaviour of a business partner.

It's all a question of payment morality

1 Payment behaviour

Changes in a company's payment behaviour are an important indicator of the economic situation of a company. An invoice that has been issued is by no means an invoice that has been paid. If a customer does not meet his payment obligations on time, the credi-tor not only incurs additional costs due to the uncalculated capital commitment, but al-so, and more importantly, his own financial solidity.

The continuous screening of your own data on cash flows can already provide an indi-cation here. Trends can be identified much faster. Are invoices no longer paid within the agreed payment period? If the number of days an invoice is overdue increases, this is often an indication of deteriorating liquidity and should be kept in mind.

Even more possibilities are offered by a comprehensive payment experience pool, which not only records one's own experience with a business partner, but also that of other companies. Am I the only one who gets paid too late? What is the trend in the industry?

2 DunTrade® - the largest payment experience pool worldwide

The Bisnode D&B DUN Trade payment experience pool illustrates the insights that pay-ment experiences gathered and consolidated worldwide offer. More than 2 billion trad-ing experiences are included every year. Companies feed their debtor data into this comprehensive network. All in all, this gives a much more up-to-date picture of the ability and willingness to pay.

Transparency pays off

Trends that show up in a changed behaviour when paying invoices will help you: 

  • to early recognise impending insolvency risks among customers
  • to avoid bad debt losses
  • in contract negotiations
  • to reduce accounts receivable and increase cash flow

A combined use of the available tools for an efficient risk management workflow of-fers companies the opportunity to protect themselves with foresight, especially in times of crisis. Risk identification and assessment are always your entrepreneurial duty - the best solution will be if you include an early warning system - i.e. constant monitoring - and the volatile instrument of payment experience.

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