What concerned me was that a supplier had put themselves in position when there was information available to make a decision regarding the level of credit that should have been granted to City Link Ltd.
Set a credit limit that reflects the risk
As at 29th December 2013 there were trade creditors of £20million and depending on trade in 2014 it is likely that that figure could increase the result being that suppliers owed £millions will not be paid.
The lesson to be learnt is to ensure you have up to date information on your customers and that you set a credit limit that reflects the risk. People in business are now used to be given a credit limit by their suppliers, however many SMEs are often reluctant to impose credit limits on their customers for fear of upsetting them. If the granting and limiting of credit limits is presented to customers in a sensitive way you should have no problems.
In summary know your customers and manage your credit exposures otherwise you could end like the City Link subcontractor.