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How do deposits and prepayments reduce credit risk? How do you build or use a credit scoring model? What forms of security or risk mitigation can support extending credit? What KPIs measure credit control effectiveness? How does credit control balance revenue growth with risk in practice? How do you set a credit policy's approval authority matrix?
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Accounts Payable & Receivable › Credit Control

How do you manage credit risk for a concentrated customer base?

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Answer

When few customers drive most revenue, monitor them intensively: tighter limits relative to exposure, frequent financial reviews, credit insurance or security on large balances, early-warning indicators, and contingency plans. Diversification of the customer base reduces the systemic risk that one failure imperils the company.
Real-world example With 60% of sales from three customers, the company insures those receivables and reviews their financials quarterly.

Common follow-ups: Why is customer concentration risky? | How can credit insurance help here?

Collections & Bad Debts Aging Analysis Credit Control
All 22 Credit Control questions