How should we assess and manage the credit risk of supplying major distributors, particularly when they have payment issues or we can't obtain credit insurance?

Assessing distributor credit risk requires weighing the business opportunity against the financial exposure, especially when traditional protections aren't available.

**Key considerations members raised:**

- **Credit insurance** — The first step is attempting to secure credit insurance coverage. If this fails (as with some larger distributors), it signals elevated risk and makes alternative protections essential. - **Cash on Delivery (COD)** — For new orders or problem accounts, COD is a viable option to eliminate payment risk, though may create friction with larger distributors who expect standard terms. - **Payment terms and credit limits** — These are your primary levers. Members noted the tension: refusing to increase terms/limits risks losing the distributor entirely to competitors, but granting them without confidence in repayment creates cash flow risk.

**The core dilemma:** Even when a distributor has payment issues, withdrawal of supply may simply mean they stock competitor products instead. This requires balancing the strategic value of shelf space against financial exposure.

**Caveats:** Members did not provide a framework for deciding whether specific distributors are "worth the risk"—this appears to be a case-by-case judgment based on the distributor's market importance, the severity of payment delays, and your own cash reserves. No members shared examples of formal financial risk scoring processes.