One Customer Is 40% of My Receivables — Concentration Risk

Scenario / Situation

It is dangerous. Not necessarily a crisis — but a material financial risk that needs active management, not passive monitoring.

Receivables concentration risk means that a significant portion of the cash owed to your business is dependent on a single counterparty's ability and willingness to pay. If that counterparty delays, disputes, or defaults, the financial impact is disproportionate.

What to check

What to check

• Below 20 percent from a single customer — manageable, monitor standard aging 20 to 30 percent — elevated — ensure payment terms are enforced and relationship is monitored closely

30 to 40 percent — high risk — active management required, consider reducing exposure

• Above 40 percent — critical risk — one default event could create a liquidity crisis

Why it happens

UAE business relationships often involve informal credit extensions based on trust and long history. Large clients in the UAE — particularly government-linked entities, large corporates, and construction sector buyers — can have payment cycles of 90 to 180 days or longer. When one such client represents 40 percent or more of receivables, the business is effectively financing that client's operations.

Additionally, legal recourse for non-payment in the UAE, while improving, is still slower and more costly than in many other markets. Prevention is significantly more effective than recovery.

What to check

What is the age profile of this customer's outstanding balance? Is the concentration in current receivables or overdue receivables?

What is the payment history of this customer over the past 6 to 12 months? Is the trend improving or deteriorating?

Is there a dispute or issue with any of the outstanding invoices that could affect collection?

What is your current cash runway if this customer pays 30 days later than expected? 60 days late? Does not pay a portion?

What to do

Calculate the cash impact scenarios: what happens if 50 percent of this customer's balance is delayed 30 days? 60 days? This gives you the risk quantification.

Tighten payment terms on new business with this customer. Future invoices should have shorter standard terms, regardless of past practice.

Proactively communicate with the customer's accounts payable team on all outstanding invoices. Do not wait for overdue — manage the relationship before the due date.

• Reduce future concentration by diversifying client revenue so that no single customer represents more than 25 to 30 percent of receivables going forward. The risk is not that this customer will definitely not pay. The risk is that your business cannot easily absorb the impact if they delay or default. That asymmetry — high impact from a single event — is the definition of concentration risk. It needs structural reduction, not just monitoring.

If this is your situation → use the Receivables Risk Checker.