Debtor risk

What is debtor risk?

Debtor risk is the risk that a business faces when selling products or services on credit to customers, where the customers may not be able to make the payments due. This can lead to a loss of revenue and possibly financial losses for the company. Debtor risk can be reduced through proper accounts receivable management, such as monitoring customers’ creditworthiness, setting strict payment terms, and taking collection measures when necessary. Companies can also insure debtor risk with credit insurance, which covers the cost of unpaid invoices due to customer insolvency or non-payment.