A new buyer wants 60 days. The order is good, the margin works, and the person asking sounds entirely credible. You have to answer, usually quickly. Say no and a competitor takes the order. Say yes and you have handed over goods against a promise from a company you have never traded with. That decision is a credit assessment whether you treat it as one or not. This guide covers what to check before you answer, and what each check actually tells you about the number you should offer.
What Offering Payment Terms Actually Commits You To
Agreeing 60-day terms is lending. You are financing your buyer's business for two months, unsecured, at your own cost.
The exposure is rarely one invoice. A buyer on 60-day terms who orders monthly owes you two orders at any moment, and that grows quietly as the relationship works. By the time you notice, the balance is larger than anything you would have approved at the outset.
In the UAE this carries a particular weight, because recovery is slow when it goes wrong. A performance order lawsuit runs roughly 90 to 120 days from the first notary notice through to enforcement, and that assumes your buyer does not appeal. Collection normally starts with an amicable approach before anything reaches a court.
So the practical maths is uncomfortable. Sixty days of terms plus three to four months of recovery means your money can be gone for half a year on a single failure.
Why payment culture here changes the calculation
Cheques remain the most common and preferred payment method in the UAE, particularly in commercial transactions, according to Coface's country risk assessment for the UAE. They carry weight because a cheque is a recognised debt instrument that a judge can enforce directly. Open accounts, letters of credit and documentary collections are all in normal use alongside them.
The ground has shifted, though. Until 2016, post-dated cheques were widely treated as a guarantee, because a bounced cheque was handled as a criminal matter. The bankruptcy law approved that year changed the footing, and a claim on a dishonoured cheque can now be treated much like other unsecured claims once composition proceedings are accepted.
The instrument you hold is therefore weaker comfort than it was. Which puts the weight back on the assessment you do before you ship.
The Checks to Run Before You Agree a Number
A useful customer credit risk assessment answers one question. How much can this buyer safely owe me at once, and for how long.
Five checks get you there.
Financial health, and what filed accounts will not tell you
Start with the balance sheet, but know its limits. Filed accounts describe your buyer as they were at a reporting date that has already passed. They are useful for structure and for spotting a trend. They are poor at telling you whether this buyer is about to run short of cash.
A solvency score compresses that into something usable. The Coface Score runs from 0 to 10 and anticipates the risk of payment default within the next 12 months, which is roughly the horizon you care about when granting terms.
Look for the direction of travel rather than the number alone. A buyer improving from a weak position and one sliding from a strong position can show you the same score in the same month.
Payment behaviour, the single strongest predictor
How a company pays tells you more than how it presents itself to you. Financial statements are prepared. Payment behaviour is simply what happened.
This is where a credit insurer's data differs from a public database. Coface collects information locally in 200 countries, going beyond public and government records, and enriches it with payment histories drawn from its own experience as an insurer. That exclusive material is updated in real time, so what you are reading reflects the position now rather than last year.
A buyer that settles on day 58 of 60, every time, is telling you something specific. So is one that pays on time until the amount rises past a certain point.
Sector risk around your buyer
Your buyer does not fail in isolation. They fail inside an industry, and the industry usually moves first.
Coface assesses 13 sectors quarterly, drawing on financial data published by over 6,000 listed companies. If your buyer sits in a sector under pressure, a currently healthy balance sheet deserves a shorter leash than the same balance sheet in a stable sector.
This is the check you are most likely to skip, because your buyer looks fine in isolation. That is exactly why it catches things.
Country risk when your buyer sits outside the UAE
If you are shipping across a border, the operating environment is part of the risk. Money that cannot leave a country has not been paid to you, however solvent the buyer is.
Country Risk Assessments run on a scale from A1 to E, covering more than 160 countries, and estimate the average credit risk of companies operating in that market. The UAE currently sits at A2 on both country risk and business climate. You can compare markets through the business risk dashboard before agreeing terms with a buyer based in one of them.
Use the country rating to set a ceiling on your appetite. Then assess the buyer inside it. A strong company in a fragile market is still exposed to that market.
Monitoring, because the assessment expires
The checks above describe a moment. Your exposure runs for as long as you keep trading.
A buyer approved last year has since traded through a changing market. The company you assessed is not necessarily the company you are shipping to now, and your exposure has probably grown, because good buyers order more.
Urba360 is where this runs continuously. Scores update, credit opinions move as the underlying position moves, and alerts surface weak signals rather than waiting for a default.
Coface publishes a case that shows why this matters. An ICT company monitored a long-standing appliance customer and saw continuous losses appear in 2019. Payment problems followed in 2022. That customer eventually became insolvent. Three years passed between the first warning and the failure, which gave the supplier time to prepare and to find stable partners.
Turning the Assessment Into a Terms Decision
The checks produce a picture. That picture has to become a number, and this is where most credit processes stop short.
A credit opinion closes that gap. Coface provides personalised credit recommendations that define the maximum amount of receivables to carry on a given customer, which is the answer you actually need rather than a general impression of health.
From there the terms follow the evidence. A buyer with a strong score, clean payment behaviour and a stable sector can carry longer terms and a higher ceiling, and that is often what wins you the business. A weaker picture points towards a shorter cycle, a lower limit, partial payment up front, or a staged increase as the buyer earns it.
The point is that you are still competing on terms. You are simply doing it with a documented basis for each answer, rather than matching whatever the buyer asks for.
Macsteel, which has used Coface risk management solutions for nearly 20 years, uses exactly this to align its terms and conditions with those of its competitors. The assessment is not a brake on commercial decisions. It is what lets you make them deliberately.
Building a Repeatable Credit Check Process
One good assessment helps once. A process protects the whole book.
Set a threshold above which a formal customer credit check is mandatory, and hold it even when the order is attractive. Write down the limit you approved and the evidence behind it, so the next person can see why. Review your largest exposures on a schedule rather than when something goes wrong. Put the check inside the sales workflow, because a credit step that sits in a separate system gets skipped under pressure.
Companies that do this well treat it as shared infrastructure. Geodis, for instance, uses Coface Business Information across its commercial strategy and customer risk work, exchanging information with Coface underwriting teams on around ten companies every month, and values the standardisation that lets teams compare partners wherever they are.
The discipline pays off quietly. You will rarely know which default you avoided.
Frequently Asked Questions
What is customer credit risk assessment?
It is the process of evaluating whether a business customer can pay you, and how much credit is safe to extend to them. A full assessment covers financial health, payment behaviour, the risk in their sector, the risk in their country, and ongoing monitoring after terms are agreed.
How do I run a customer credit check on a UAE company?
Obtain a business credit report covering the company's solvency, its recorded payment behaviour and a recommended credit limit. Coface provides this through Urba360, drawing on data collected locally across 200 countries and enriched by its own payment history records.
What does the Coface Score measure?
It runs from 0 to 10 and anticipates the risk of a company defaulting on payment within the next 12 months. It is standardised, so the same score carries the same meaning in every market you trade in.
Why are audited accounts not enough for a creditworthiness assessment? Filed accounts describe a past reporting period. Difficulty usually shows up in payment behaviour before it reaches a published statement, which is why behavioural data and continuous monitoring identify problems earlier than annual filings.
Should I reassess a customer after granting terms?
Yes. An assessment reflects the moment it was made, while your exposure continues and usually grows. Monitoring with alerts flags deterioration as it happens, which is the difference between reducing a limit and writing off an invoice.
How long does it take to recover an unpaid invoice through the UAE courts?
A performance order lawsuit takes approximately 90 to 120 days from the initial notary notice through to enforcement, assuming the debtor does not appeal successfully. Collection normally begins with an amicable approach first.
Deciding terms is easier when the buyer is not a stranger. To see what a customer assessment covers before you commit to 30, 60 or 90 days, visit Coface customer risk assessment.
