Supply Chain Management: What are the Dangers of Insolvency?

Supply Chain Management: What are the Dangers of Insolvency?

When big companies collapse, they often send shockwaves through the economy. This is true of Carillion’s collapse into liquidation early in 2018, and the fall of high street names, including ToysRUs and Maplin.

This leaves thousands of jobs in the balance for those people they directly employ.  However, it also it risks bringing down other firms in its wake.

“When a big company collapses, the impact on other firms in the supply chain is one of the biggest causes of insolvency in the UK,” Paul Daine of Premium Collections points out.


Turbulent Waves

If a major contractor goes bust there will inevitably be an impact felt by other businesses.

“Potentially, it could impact on thousands of creditors,” says Paul. “It’s a wave effect, with people further along the supply chain finding themselves caught up in the turbulence.”

“Suppliers should not take a passive role here, and instead act to manage the situation as best they can,” Paul advises.


How Can You Take Charge?

“It’s important to react quickly to events if you’re in the supply chain. The faster you do this, the more likely you’ll be able to lessen the impact on you.”

This means contacting the insolvency practitioner to find out what their plans are for dealing with the business concerned.


“If the troubled business is continuing to trade, to be marketed to a buyer, there may be an opportunity to supply to the new owner”

Paul Daine, Premium Collections


“If, however, it’s a case that the business is ceasing trading, you want to know this as soon as possible so you can deal with the loss of turnover.”

“Where the company concerned is still trading, the subcontractor may still be able to provide services,” suggests Paul, “but in this situation, there must be assurances that they will receive payment”

“Get it in writing from the insolvency practitioner,” advises Paul.

“However much of a shock the initial impact brings, it is vital for subcontractors in the supply chain to start planning for whatever future they anticipate,” Paul explains.

This includes the following considerations:

  • Can you weather the storm if you must write off what the company owes you?
  • Can you trade with the subsequent loss of revenue?
  • Will you need additional finance?”


Above all, subcontractors caught up in the supply chain where insolvency happens should seek professional advice.

“Contact your credit insurer, claim bad debt relief, and seek advice on all aspects of commercial debt recovery open to you,” Paul advises.


“If you are part of the supply chain, your priority must be to survive

Paul Daine, Premium Collections


“Firms in the supply chain must embed sound credit control and debt collection processes in how they operate,” concludes Paul.  “This enables them to maximise the chances of getting paid before a contractor or client gets to the point of becoming insolvent.”

To strengthen your credit control and debt collections processes to protect your business, please call Premium Collections on 0161 962 4695.


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