Why concentration matters
A business can look profitable while being financially fragile if a large share of revenue depends on one customer. The same exposure appears when a major customer remains but pays much later than expected.
1. Calculate the concentration
Divide each major customer's annual revenue by total annual revenue. Then calculate the combined share represented by your top three and top five customers.
2. Add payment behaviour
Revenue share alone is incomplete. Record agreed payment terms, actual days-to-pay and overdue balances. A large, slow-paying customer creates both concentration and liquidity risk.
3. Model the customer disappearing
Remove the customer's future revenue from the forecast but keep costs that would remain. Recalculate profit, closing cash and the first period in which cash becomes uncomfortable.
4. Model delayed payment separately
Move a major receipt 30 and 60 days later. This shows whether the business has enough cash headroom to absorb collection delays without treating the customer as permanently lost.
5. Set management triggers
Choose the concentration percentage, overdue balance or days-late level that forces a review. A trigger turns the risk into something you can manage rather than something you notice after the event.
6. Build the response before you need it
Decide which costs can be reduced, how collections will be escalated and how much replacement revenue is needed.
What to do next
Use the Client Concentration & Default Risk Action Plan to calculate the exposure and response. Then use the JEBS 13-Week Cash Flow Forecast to see exactly when a client loss or late payment would hit cash.