Creditors of distressed businesses
There is a risk to Companies and individuals who supply other parties that they will not be paid. This can be offset using bad debt insurance (but often this is too expensive) or through obtaining guarantees off related parties (who are often unwilling to provide this). It therefore often comes down to a commercial decision as to whether to supply a particular party in the particular circumstances.
In order to reduce the likelihood of having a significant bad debt it is important that businesses have adequate credit control systems in place. Such systems need to cover the initial acceptance of a customer through to monitoring and debt collection.
Creditors and suppliers should look out for warning signs that their customer is experiencing a financial crisis.
