4 Reasons Your Customer Due Diligence Is Falling Flat

One of the main reasons your customer due diligence might be falling flat is that it simply may not be a priority for your team or within your individual role. That’s what our Cost of Late Payments study found – with 61% of the respondents admitting they don’t always analyze a potential customer’s historical trade payments before signing a contract with them. And when we asked why they don’t do this level of customer due diligence, 17% of the respondents said it wasn’t a team/role priority.  

It’s understandable—your sales team is focused on closing deals while your finance team is tied up in strategic financial management, including Accounts Payable, collecting payments, cash flow forecasting and working capital management. With so much to manage every day, we get it; constantly reviewing your customers’ business credit reports and their payment behaviors might fall down your priority list. 

But if you’re not analyzing your customers’ trade payment data throughout the customer lifecycle, you could miss out when things change in their financial circumstances. Remember, no customer’s financial health will stay exactly the same from the time you started working with them. They could see expenses rise, while materials and labor costs could rise too. They could lose some customers who account for a high amount of their annual revenue. They may have taken out new business loans or investments from VCs to fund the expansion of the business into new markets or the development of new products. All these factors could come into play – leading to cash flow issues and making it harder for them to pay their suppliers on time. 

By making the analysis of your customers’ historical payment behaviors a core part of your customer due diligence, you can spot potential cash flow issues early and make the right decision for your business. That might mean shortening their payment terms, requiring the to pay part or all of their payment up front before delivery of their goods or assessing whether it’s worth working with them at all.  

So, if it’s not a current priority for your team or your role, then you can show your business why it should be more of a priority. Show your business – your boss, the head of your finance department, your CFO and the C-suite – how analyzing this type of data can lead to stronger cash flow, less risk and bottom-line growth. Those are things they value. They’ll thank you for it.

Remember how I said earlier that 61% of businesses don’t always analyze a potential customer’s historical trade payment data before signing a contract with them. Well, 22% of businesses said the reason for this is that they doubt the importance of the data.

But I beg to differ. Historical payment data offers so much insight into how a company pays its suppliers, the health of its cash flow, the strength of its financial management practices and even the risk of bankruptcy. 

Take Forever 21, for example. The popular mall retailer filed for bankruptcy in March 2025 – its second bankruptcy in six years (previously filed for bankruptcy in 2019). When we analyzed the retailer’s historical payment behaviors from the last 12 months, there were some clear signals that the company was having serious cash flow issues. For example, the company’s Days Beyond Terms (DBT) – how late they pay their bills – jumped from 31 in March 2024 to 43 in April and then to 48 in May. To put this into context, this means Forever 21’s suppliers were being paid over a month late. While the company’s DBT dropped to 9 in July and August, this improvement was short-lived, as its DBT climbed again to 19 in September and 28 in October. The erratic nature of Forever 21’s payment behaviors indicates periods of financial strain where the company likely had to prioritize certain payments over others, a common sign of liquidity challenges. Although the company’s DBT stabilized at 14 from December 2024 through February 2025, it remained above the industry average DBT (12). 

The company’s bankruptcy filing suggests that these improvements were not enough to offset deeper financial pressures. Now, with plans to wind down its U.S. operations and its search for potential buyers, Forever 21's inconsistent payment history and cash flow struggles should serve as warning signs for creditors and suppliers evaluating financial risk. 

Let’s say I’ve done my job and convinced you that you should be analyzing the historical payment behaviors of your customers. But then you don’t really know where to find that information. Let me help you out.

Start by reviewing the business credit report for your customers. You can find this in your credit risk and business intelligence provider’s platform (hint hint: we have it). Once you’re in your customer’s business credit report, you want to go into the ‘Payment Data’ section. This section is a treasure-trove of information that will be incredibly valuable for your team. 

What you can find in the payment data section:

• Trade payment dashboard: This offers highlights and stats about your customer’s payment behaviors, including their current DBT, the percentage of past due bills, recent high credit, among other information 

• Monthly DBT trends: This shows you a visual graph of a customer’s late payments for the most recent 12-month period. More specifically, you can see how often and when its DBT fluctuates so you can spot early signs of cash flow issues. And you can even see how a customer’s DBT compares to the industry average.

• Invoice aging: This shows you how many of your customer’s outstanding bills hae fallen into the past due categories by age (i.e. 1-30 days, 31-60 days, 61-90 days, 91+ days).

I like to think of it this way. Trade payment data is the valuable data that’s a strong indicator of cash flow issues and bankruptcy risk, while business credit reports are the place where that data lives. Knowing where to find the right credit risk data is half the battle, right? Now that you know where to find it, you’re already half way there to better customer due diligence. 

Customer due diligence isn’t something you can do just a little. You need to be as thorough as possible – reviewing and analyzing the right types of data that will give you a clear indication of how reliable new and existing customers will be and how likely it is that you’ll be paid by them on time (or at least close to it). 

To help, here are three ways to make sure your customer due diligence doesn’t fall flat. 

1. Review every customer’s business credit report throughout the customer lifecycle: Don’t just check customers’ credit reports at the start of the relationship – you need to assess their financial health and creditworthiness regularly (monthly is ideal). This is the only way you’ll be able to know which customers pose a financial risk and which ones will grow your bottom line. 

2. Always analyze historical payment trends as part of your customer due diligence: Don’t just rely on credit scores and credit limits. Sure, these matter. But they aren’t the end all and be all. You should be looking at the historical payment behaviors of your customers for at least the most recent 12-month period. Why? So you can see how long it takes them to pay their own suppliers. That will give you a better indication of how likely it is that they’ll pay you on time – and whether your cash flow will be healthy or take a hit.   

3. Set up automated alerts: You probably have a lot on your plate. We get it. So, while your intention might be to check the business credit reports of your customers regularly, you might just forget because other tasks rank higher on the priority list. This is where technology can be such a lifesaver. Use it – it’s there to help you. Set up automated alerts so that whenever certain data points in your customer’s business credit report change, then you’ll be notified via email. So, if their DBT has suddenly spiked from 10 to 60 in a single month – you’ll know and you can investigate what’s going on.