Insolvent Customers: 8 Key Steps To Limit Losses

Businesses today face a growing risk of seeing a major customer become insolvent or seek protection under the Bankruptcy and Insolvency Act (BIA) or the Companies' Creditors Arrangement Act (CCAA). In such cases, the consequences for your operations and cash flow can be severe.

Here are some concrete steps you should take immediately if you learn that one of your customers is in financial difficulty or has filed for court protection. One of the first things to do is identify which type of protection your customer is under and obtain any available documents or orders.

1. Immediately cease all new deliveries and services

If your customer is insolvent, each additional delivery or service increases your exposure, with no guarantee of payment. Notify your entire team as quickly as possible. Before delivering anything more, ask for payment in advance (cash if possible). Once a trustee is appointed, you can obtain written confirmation that amounts owed will be paid on