Insolvency is contagious. When a customer fails, the damage rarely stays on their side of the contract: unpaid invoices, goods delivered and never paid for, a pipeline built around a buyer who is suddenly gone. The companies that come through a customer's insolvency with limited damage are almost never the ones that reacted fastest at the end. They are the ones that read the signs early and adjusted their terms while they still could.

The warning signs worth taking seriously

The most reliable signal is payment behaviour, because it is hard to fake for long. Watch for a pattern, not a single event: invoices paid later each cycle, round-figure partial payments instead of settled invoices, requests to extend payment terms "just this quarter", disputes raised late over invoices that were never questioned before. A customer who suddenly quibbles about deliveries it has accepted for years is often not unhappy — it is buying time.

Around the payments, look at the people and the paper. Management or ownership changes without a convincing story, the departure of a long-serving finance chief, or a change of auditor deserve attention. So do disclosure delays: annual accounts that arrive later each year, financial information that used to be volunteered and now has to be requested twice.

Finally, watch the ordering pattern. Both a sharp drop and a sudden unexplained spike can be warnings — the latter sometimes means other suppliers have already cut the customer off.

What the signs justify — and what they do not

None of these signals proves anything, and most have innocent explanations some of the time. What they justify is not panic but review: quantify your current exposure, including goods in transit and work in progress; reread the contract to see which rights you actually hold; and decide consciously how much additional exposure you are willing to build from here. The mistake is not misreading a single signal — it is continuing to extend credit on autopilot while the signals accumulate.

Contractual protections that actually work

The best protections are agreed before trouble starts, ideally when the relationship begins and the customer has no reason to object.

  • Payment terms are the first lever. Shorter terms, milestone payments, partial prepayment for new orders, or a hard credit limit all reduce the exposure that can accumulate before you notice anything.
  • Security converts an unsecured claim into something with substance: a deposit, a bank guarantee, or a parent-company guarantee where the customer belongs to a stronger group.
  • Retention of title lets you remain owner of delivered goods until payment. In Switzerland it only takes effect if it is entered in the official register — a formality many suppliers skip, which is why so many retention clauses turn out to be worth nothing when they are finally needed. If this protection matters to your business, take the formality seriously.
  • Suspension and stop-delivery rights let you lawfully pause performance when payments stop, rather than choosing between breaching the contract and financing a failing customer. Clear default triggers and the right to demand security for future deliveries belong in the same clause.

A caution about the endgame

When a customer is visibly close to the edge, there is a temptation to grab whatever payment can be extracted. Be careful: payments and other advantages received shortly before a bankruptcy can, in certain circumstances, be challenged and clawed back afterwards. Aggressive last-minute collection can also tip a fragile customer over. How to secure your position in that final phase without creating new risks is genuinely fact-dependent — this is the moment to take advice rather than improvise.

Acting firmly without overreacting

A customer in difficulty is still a customer, and many recover. The practical course is usually a direct conversation: name what you have observed, ask for current information, and propose adjusted terms that let the relationship continue on a safer footing. Escalate in steps, and document each one — what you knew, what you asked, what was agreed.

The worst outcomes belong to suppliers who saw the signs, said nothing, and kept delivering on unchanged terms. If one of your significant customers is showing these patterns, we are happy to review your contracts and exposure with you before the situation decides for you.