Buyer credit risk assessment: the firewall protecting your profits

In an era of tariff threats, geopolitical tension and economic uncertainty, bad debts and defaults are on the rise. Global business insolvencies soared by 19% in 2024, and we expect them to stay at the same elevated level in 2025.

Against this backdrop, B2B businesses still have to trade, speculate and grow. Companies remain ambitious and globally focused, and technology continues to open up opportunities around the world.

But how do you target new customers and new markets in such a volatile business climate? How can you be sure that you’ll be paid for the products or services you deliver? 

Managing buyer risk has never been more important, but there’s a widening gap between how businesses assess customer creditworthiness and what market realities demand. That gap spells danger for B2B businesses, manifested in a mounting backlog of unpaid invoices.

The good news is that closing the gap not only mitigates customer payment risks, it also offers opportunities to extend credit more confidently, even in challenging markets. In short, a comprehensive credit risk strategy is a tool for growth.

In the rest of this article, we’ll explain what that means.

Bad debts floor good businesses

A bad debt is a debt that is unlikely to ever be paid. For more on the causes andrisks of bad debt, see our comprehensive guide.  Suffice to say here that bad debts bring serious problems:

• Operational challenges. You can be owed a small fortune, but if it’s not in yourbank account you might struggle to pay staff and suppliers or invest for thefuture. Keeping the lights on requires cash fl ow. Bad debt dams the river.
   
• Reduced profitability. Debts that are heavily delayed or never paid undermine profitability, weakening your financial position and making securing finance for growth more difficult. Bad debt is an existential threat to your business.
   
• Accumulating risk. Businesses labouring under the strain of unpaid invoices have to work harder to make up the shortfall. But seeking new customers in these circumstances can lead to panicky decisions, lax due diligence and heightened risk.

The chances of being paid late for the goods and services you supply - or not being paid at all - rise in times of economic stress, when your buyers may be facing increased competition and reduced revenue. Trade tensions, geopolitical shifts and increasingly complex supply chains can all impact customers’ ability to pay, and all are on the rise in 2025.

The risks and reward of credit

How do you guard against bad debt? The most obvious strategy is to insist on payment in full in advance, or at least complete settlement on receipt of goods or services. Extending credit can be risky when dealing with new customers or new markets.

At the same time, credit can result in competitive advantage. Customers have their own cash flow issues to navigate. Offering credit can mean the difference between securing a sale and losing out to a more flexible competitor. Customers may buy more on credit than they would if they had to find cash up front.

If you do offer credit, the challenge is in making sure you’re extending it with confidence. That can be tricky. According to the latest Payment Practices Barometer survey, our annual global pulse on B2B payment behaviour, over a third of companies across global markets say that the biggest challenge they face when selling on credit in B2B trade is assessing the creditworthiness of their buyers.

Are your buyers' creditworthiness assessments fit for purpose? 

That challenge is made harder by incomplete or outdated credit assessment checks. Companies often rely on basic tools or long-established practices to assess the creditworthiness of customers and targets. In the current volatile climate, these checks may simply not be enough.

For example, businesses often employ a ‘once and done’ approach to the creditworthiness of buyers. That means they assess credit risk during initial customer due diligence and never again. But creditworthiness is fluid. A customer who presents a minimal default risk today might be a significant risk 12 months down the line. Creditworthiness needs to be continually monitored.

Risk assessment can also be based on incomplete data or carried out by decision makers who aren’t suitably qualified or experienced to make a balanced judgement. Pressure from the sales team can be a factor here. The last thing sales professionals want is what they see as over-fastidious credit risk assessments undermining their relationships with customers.

Whatever the reason, the result of inadequate creditworthiness assessments can be unpaid invoices and bad debt. It can mean your business extending generous credit terms to clients who then struggle to pay their bills, leading to delay and default.

Keeping payment risks at bay 

Still, even in challenging times, there’s much you can do to keep payment risks at bay. Every business should understand and apply a base level of credit management fundamentals.
They include:

• A clear contractual framework. Make sure paperwork is clear, precise and will hold up in a court of law.
   
• Up to date customer data. Capture accurate buyer business data - billing address, legal form, key directors, contact details - and regularly update it.
   
• Line of credit. Establish a maximum line of credit for customers which, if breached, triggers an appropriate course of action.
   
• Payment options. Have a range of payment options, from prepayment to lines of credit, depending on customer risk. Take each case individually, basing decisions on real-world data.
   
• Debt collection. Have a debt collection system in place that is well-organised and consistent, from effectively worded reminders to bespoke policies for larger and more important customers.

While these fundamentals are necessary, they don’t detract from the need for comprehensive creditworthiness assessments. Dependable customers make for reliable business. Effective creditworthiness processes are essential for consistent cash flow and seamless growth.

The critical role of credit insurance 

Credit insurance offers a financial safety net for B2B businesses in an uncertain economic climate. If customers don’t pay, your credit insurer will cover a large portion of that debt. Cover against defaults gives businesses the confidence to grow.

But good credit insurance does much more than provide protection against non-payments. A range of complementary services can provide the fundamentals of a comprehensive risk assessment strategy: that is, data, intelligence and insight. They can make you less prone to bad debt, and smarter in the way you target and assess potential customers.

In short, the right credit insurance can give you access to expert risk analysis and up-to-date buyer assessments. 

The decisions you make about the creditworthiness of customers need to be made on the basis of complete and up-to-the-minute information. Credit insurance provides it, reducing pressure on your credit management team and bringing data-driven intelligence to buyer management processes.

A tool for growth 

With that in mind, it’s clear that credit insurance isn’t just a safety net, it’s a strategic tool for growth. Our creditworthiness tools allow you to pursue new markets with confidence, negotiating from a position of strength. They give you the data you need to make informed credit decisions, helping to protect your business against unpaid invoices and customer insolvencies. 

As we’ve seen, outdated or incomplete assessments expose businesses to rising default risks, strained cash flow and missed opportunities. By contrast, smarter data, dynamic risk monitoring and proactive customer insight help you remain competitive and resilient in the face of growing economic uncertainty. 

A comprehensive customer creditworthiness process is now a pillar of good business, but doing it properly takes technology, resources and expertise. We provide them, helping you reduce risk, identify reliable new customers and retain your focus on growth.
 

How our digital creditworthiness assessment solutions can help your business thrive 

We also offer market-leading intelligence that can reduce your exposure to bad debt in the first place. For instance, our APIs are tailored to give you anytime access to comprehensive financial health details and the credit scores of your buyers. 

It provides reliable assessments of the creditworthiness of customers, monitors that information in real time and alerts you automatically to any change in a buyer’s risk status, such as new insolvency filings. If a buyer’s payment behaviour changes - they start taking longer to pay invoices, perhaps - we’ll let you know about that, too.

Atradius Analyser goes a step further. As well as collecting business information on potential customers and new markets, Analyser helps you evaluate how creditworthy your business appears to others in your supply chain. 

By doing so, it gives you a powerful bargaining chip in payment terms negotiations. Analyser also provides access to our database of information on new opportunities, streamlining your search for solid new buyers and reliable export markets. 

Uncover the hidden risks in your buyer creditworthiness assessments by treating this process as a strategic priority rather than just a routine task. Doing so allows your business to spot and address financial issues before they affect cash flow and profitability. 

To explore how our insights can strengthen your credit risk strategy, get in touch today to see how we can help you stay ahead.