A TRW Business Credit Services and Credit Research Foundation study found the following indicators of which customers or prospects are likeliest to pay:
· The most powerful predictor of payment performance is payment record (current and past).
· Credit ratings based on financial strength have no bearing on future payment performance.
· Revenue is not a good indication of good payment performance.
· The greater the firm’s net worth (total assets less liabilities) and time in business, the likelier it is to pay. Building real net worth takes years.
· Most businesses fail in the early years, so the longer a firm is in business, the more confident you can be of receiving timely payments.
· The higher the percentage of accounts a customer has paid within 90 days, the greater the likelihood you will receive prompt payment.
· A predictor of future poor payment is the number of accounts past due 90 or more days.
Source AIPG.ORG
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