Insolvencies often happen when an important business partner folds. Particularly small and medium-sized enterprises with capital ratios of less than 20% can fall victim to this domino effect.





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They find it difficult to weather losses caused by a customer's insolvency and can fast end up in dire straits, with liquidity constraints threatening their very existence.

However, businesses almost never go into insolvency over night. Therefore, a timely identification of vital factors is indispensable to protect oneself. A 100% accurate prognosis is hardly possible. It is not uncommon for companies to be successful despite showing negative indicators.

On the other hand, it is not uncommon for businesses that in the past did not show unfavourable signs to file for insolvency. But practical experience shows that the chance for a future insolvency will grow with the number of negative characteristics and indicators. 

This checklist typifies the most important indicators you should monitor. It thus enables you to adapt your business policy accordingly. The credit risk goes up with the number of indicators that are fulfilled. And uncertainty grows with the questions that do not lead to concrete answers (n.i. =no input).

Payment behaviour

A customer with a bad payment record is an unmistakable early warning sign, particularly if negative changes occur. Be sure to adapt your terms of payment and security measures accordingly.

Senior management

The managerial capabilities of senior staff undeniably play a crucial role in company's strategic development. You need to be informed about some of the following criteria above all in the case of larger credit volumes.


Return on sales is often at a low level. Therefore, adequate liquidity and financing capacity are crucial. Moreover, Basel II now obliges companies to commit themselves to an optimal financing scheme.


More than in other areas, weak spots in the accounting department can lead to grave financial problems. Moreover, an accounting that is flawed and not based on the latest data is often the reason that a company's management fails to identify serious problems in time.


Your customers' procurement policies allow you to draw important conclusions as to their creditworthiness.


Critical weak points in the provision of goods and services can have serious financial implications for a company.


Sales and turnover are decisive factors in securing a company's financial standing. Negative developments can lead to insolvency within only a short period of time.

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