Customer risk

Customer risk (or credit risk) is the probability that a customer will pay late or not pay at all. It depends on the customer’s financial health, payment history, and the amount owed.

Example

A company generates 30% of its revenue from a single customer. If that customer defaults, the company’s cash flow is at risk: the risk is both high and concentrated.

Why It’s Important

Accurately assessing this risk allows you to sell without putting the company at risk: credit limits, guarantees, credit insurance, and appropriate payment terms.

For more information: Customer Risk Management, the Credit Management Guide, and the Customer Risk Management Excel Kit.

See also: customer scoring, credit insurance, credit limit.