Strategies: Keep an extra eye on receivables this holiday season

— -- This holiday season, I have an important warning for every small company that sells to large corporations, especially big retailers.

Carefully watch how much they owe you, and do everything possible to collect before December 24. Why? Because I'm afraid the last week of this year will see a number of bankruptcies, even of companies that are household names.

I hate writing a column like this. After all, like most entrepreneurs, I'm an optimist. And I know that when people are fearful, the economy worsens. But my responsibility is to you – my small business reader. And if you sell to a company that goes bankrupt – or if your customers sell to companies that go bankrupt – you could be left in a dire situation.

I'm not alone in worrying about the health of some major companies. Over dinner, a friend told me the large law firm she works for sent a memo with a list of 30 large companies they considered to be risky, warning the attorneys to carefully monitor their billings to those clients. She was shocked at the names on the list – many were stores where she shopped.

In fact, insurance companies that provide "trade credit insurance" are also nervous. This is insurance that large suppliers take out to make sure they'll get paid if something, such as bankruptcy, happens to their customers. These insurance companies are looking at the economic climate, and reducing or eliminating insurance on some companies' receivables.

"Business bankruptcies continued a relentless upward pace in the first quarter of 2008, and data suggests that the trend could increase even further as the year progresses…" That was the conclusion of Euler Hermes ACI, the largest provider of trade credit insurance in the U.S., earlier in the year. The recent financial turmoil has made it even more likely there'll be a rash of business bankruptcies.

My prediction – many of these will happen in the last week of this year. Why?

Every year, big retailers stock up for the holiday season. They order lots of goods from suppliers. You – or your customer – may be one of those suppliers. Retailers probably don't have to pay you until January or February. Most years, that's no problem.