Scope a CFO review of dependence on one large customer

A large customer can create several different questions. You may be negotiating new terms, considering dedicated equipment, preparing for a renewal or deciding whether to pursue smaller accounts. Tell the CFO which decision management faces. A single percentage of annual revenue will not answer every one of those questions.

Provide the customer-group structure, contract references, billing history, outstanding receivables and relevant cost records. Identify related customer entities that buy through different accounts. Ask the adviser to explain how the proposed review will group those relationships, so the result does not understate dependence by treating several billing names as unrelated buyers.

Request separate views of revenue, contribution, receivables and resources committed to the relationship. A customer with a large sales share may also require dedicated staff, customer-specific inventory or unusual payment terms. Another may contribute a substantial margin with little dedicated capacity. Those operating differences belong in the decision file.

Agree how shared costs will be handled. Ask the CFO to distinguish costs that could stop after a loss from costs the business would continue paying. A report that allocates overhead away with the customer's revenue can make a severe cash problem appear smaller than it is. The assignment should show the evidence behind each proposed cost response.

Use periods that reveal the actual pattern. Compare a recent year with current commitments and the expected renewal period rather than relying on an unusually strong month. Record any one-off order separately. There is no universal concentration percentage in this guide that makes a customer relationship safe or unsafe.

Ask the adviser to distinguish a payment delay, a reduction in orders, a price renegotiation and a complete loss. Each scenario should state its timing and the assumptions for collecting existing invoices. A future sales loss and a write-off of money already owed are separate events; the model should make any connection explicit.

For a hypothetical business, losing $30,000 of monthly sales does not automatically mean a $30,000 monthly cash reduction forever. Some purchasing may stop, contractually committed costs may continue, and collections may arrive after delivery ends. The purpose of the review is to quantify those movements using the company's facts.

The SBA's business-planning material asks businesses to connect customer segments, sales plans and financial projections. Use that discipline when assessing replacement revenue. Require named actions, responsible people and a plausible sales cycle; do not accept an immediate replacement assumption simply because management intends to diversify.

A useful handoff includes the customer-group map, reconciled starting figures, scenario assumptions, cash effects and proposed decision triggers. Ask the CFO to separate operational options from matters requiring legal advice, such as termination rights or contract restrictions. The analysis should identify questions for counsel without pretending to resolve them.

Compare proposals on the work needed to produce that file, including interviews with sales and operations and reconciliation of inconsistent customer records. Agree whether the adviser will present the findings to management and revise the model after commercial discussions. Those activities may be more valuable than a longer report.

Assign an internal owner to update the analysis when the customer changes its order pattern or the company makes a new dedicated commitment. Preserve the approved version and the actions management selected. The project should leave a usable decision process, with specific events that prompt a fresh review, rather than a concentration ratio that sits unchanged in the board pack.