In 2024, business failures amounted to more than $30 billion in unpaid bills. And we’re seeing signs of this slowdown continuing this year.
73% of businesses report that customer delinquency numbers increased over the past year, with nearly two-thirds saying they have at least one delayed payment that’s 90 days or more past due, accounting for more than 10% of revenue.
With so much at risk, credit portfolio management becomes more important than ever. It impacts you directly when your customers can’t pay on time. It also introduces greater supplier risk. If your vendors are struggling financially, your supply chain is at risk.
An Executive View of Portfolio Risk
Credit portfolio risk management means understanding the collective exposure across your entire network of clients and suppliers. It’s about seeing the full picture, how much working capital is at risk if a key customer defaults, or what happens if a major supplier fails to deliver.
While traditional credit reviews focus on single accounts, you need to evaluate patterns and concentrations across your entire portfolio. Overexposure to a handful of large customers, dependency on one supplier region, or a downturn in a shared industry can quickly create significant issues. You need a way to monitor the financial health of the companies you do business with to avoid their problems becoming yours.
The Rising Tide of Credit and Supplier Risk
There are warning signs all around us these days. Business bankruptcies rose 11.5% over the past year. The American Bankers Association is reporting a softening of credit conditions in the first half of 2025, with a significant drop in business credit quality.
When credit quality weakens, defaults and payment delays usually follow.
That pressure doesn’t stop with your clients. It flows backward into your supplier network. When suppliers face liquidity issues, delays and shortages disrupt production, inventory, and order fulfillment, which can put your revenue at risk.
You must monitor client financial health and supplier risk at the portfolio level to understand exposure and look for early warning signs.
What You Need to Do to Protect Your Business
Managing portfolio risk starts with visibility. Your first step is to build a comprehensive map of your credit and supplier relationships:
- Identify top customers and suppliers by revenue, spend, or dependency.
- Segment by industry, geography, and payment history to understand correlation and concentration risk.
- Quantify exposure concentration, such as the percentage of revenue tied to your top 10 clients or key suppliers.
Armed with this information, you’re better equipped to understand client and supplier risk.
Integrate Credit Portfolio Monitoring
Many businesses only check financial health when extending credit or onboarding new suppliers. Maybe they do semi-annual or annual checks. Today, you need ongoing credit portfolio management to uncover trends. Conditions can change quickly.
Credit portfolio management is key to:
- Identifying shifts in business credit quality across multiple accounts.
- Detecting early warning signs of payment stress or delinquency.
- Modeling potential exposure if a major customer or supplier defaults.
Balance Exposure Across Clients and Suppliers
One of the ways you can balance exposure is through diversification. Watching exposure to specific geographical regions or industry sectors can help you avoid concentration. The same applies to supplier risk as well. Overdependence on single-source suppliers can put your business at risk.
You’ll want to:
- Avoid reliance on a small group of customers or vendors.
- Source multiple suppliers, just in case.
- Balance your exposure across sectors, credit tiers, or geographic regions where possible.
- Understand the impact of default or disruption to your business.
There’s always risk in business, especially when you’re extending credit. You need the right tools and ongoing credit portfolio management to keep a close eye on things to balance that risk.
Embed Supplier Risk Management in Corporate Strategy
Strong portfolio management covers clients and suppliers, yet many businesses underestimate the risk from supplier defaults. When a key supplier is having money trouble, it can directly impact how you serve your clients.
You should develop supplier scorecards as part of your credit portfolio management strategy for ongoing evaluations of your vendor’s financial health. For example:
- Uncovering changes in financial health or key indicators
- Examining payment trends and credit utilization increases
- Monitoring public filings, such as liens and bankruptcies
- Comparing financial health to industry sector norms
Turning Portfolio Insight into Financial Resilience
Effective credit portfolio management provides the visibility and insight to make better decisions for your business. With so much uncertainty today, tightening credit, and increasing business failures, you must be proactive to protect your business. Mitigating exposure across your clients and customers, as well as reducing supplier risk, have become key components of managing risk in today’s environment.
Command Credit provides account monitoring and ongoing credit portfolio management, backed by the latest credit data to help you balance and protect your business. Schedule a free consultation and let us show you how we can strengthen your risk management strategy.