Concentration on One Account Priced as a Standing Exposure
Pricing single-account concentration requires reflecting buyer credit liability, payment terms, and delisting provisions directly in net unit margin.
Non-Payment Default
Meaning
A contractual failure occurring when a buyer does not pay for delivered goods or services within the agreed credit term constitutes a breach of the sales agreement. A non-payment default triggers immediate remedial actions from the seller, ranging from suspension of future shipments to the start of legal collection efforts. This event damages the commercial relationship and disrupts the supplier’s cash calculations.
It can also lead to the cancellation of credit insurance policies for the affected account.
Credit Insurance
Insurers must be notified immediately when a buyer misses their payment deadline. Delaying this notification can invalidate the policy and leave the seller exposed to the full amount of the loss.
Legal Redress
Contracts usually contain clauses that allow the supplier to charge interest on overdue amounts. If the payment remains outstanding, the seller has the right to repossess unsold inventory held by the buyer.
Distribution Disruption
A breach of this nature usually leads to the termination of the distribution agreement. When a partner fails to pay, the supplier must find alternative routes to market to avoid localized product shortages. This transition can cause temporary sales declines and damage the brand’s presence in that territory.
It also forces the manufacturer to write off the unpaid balance as bad debt.