How do I know my client is going bankrupt?

Every year, around 5,000 companies go bankrupt due to insolvency - and the trend is rising. With each bankruptcy, suppliers and other business partners of the affected company lose a lot of money. Sometimes so much that they themselves run the risk of becoming insolvent.

To avoid this risk, it is important to recognize payment difficulties with the customer in time, because a company does not go bankrupt overnight. The crisis often begins in secret, but there are usually signs. The first ones are, for example, the change of the payment method or a late payment: Your customer, instead of paying immediately and taking advantage of the discount as before, now claims the whole payment period. Or he pays your invoice slightly late for the first time. If you even have to send him a reminder, this may be a sign of impending insolvency. Then, at the latest, you should keep a closer eye on your business partner and collect all information that could provide information about payment difficulties or even insolvency. Such indications may be:

- The bank account will be changed. Thus, you lose the possibility of placing a hold on the previously used customer account in the event of non-payment.
- The deliveries, which have never been complained about before, are suddenly complained about for no reason (so-called tactical notice of defects).
- Contract conditions deteriorate
- For example, your customer suddenly wants to pay a lower price than originally agreed.
- Deliveries are requested later than usual or even a delivery block is issued.
- You obtain a current excerpt from the debt collection register using the form at www.betreibungsschalter. ch and discover several debt collection proceedings that have only recently been initiated. Or even worse: your customer has already been pursued for taxes, VAT or social security contributions.
- You are replaced by another supplier, even though their contract terms are no better than yours.
- Employees of the customer are laid off, staff is reduced.
- The management and the board of directors change or the auditors, if any, have resigned. The quickest way to find such information is to visit www.zefix.ch.
- Branches and operating units are closed.
- The registered office is relocated.

Each of these signs can be harmless on its own and seem plausible. But if several of them occur at the same time, you can no longer completely rule out the possibility of your customer going bankrupt. Then you should no longer deliver against invoice, but switch to cash or advance payment or insist on cash on delivery.

Do you need legal advice?
The Observer Consulting Center offers you and your employees tele - phone expert advice on legal issues concerning your company - 6 months for only Fr. 99.-. Order the consulting package for SMEs at www.beobachter.ch/kmu or 0800 83 0800.

Book tip
Successful as an SME. Crisis-proof in dealing with customers, staff, suppliers and lenders Plan liquidity, collect receivables, get new money, draw up contracts correctly, maintain and win customers, use employees optimally. This book helps before the going gets tough.
248 pages, Fr. 45.-. 1st edition, 2010 ISBN 978-3-85569-435-8 Observer Book Publishing.