The Exposure Ledger: A Supplier's First Three Days After a Customer Enters Administration

News that a significant customer has entered administration rarely arrives with clean paperwork. It may come from a sales contact, a failed payment or a filing on Companies House. For a UK SME supplier, the first 72 hours are not primarily a legal contest. They are a cash-flow and stock-control exercise. The aim is to establish the facts, stop the bleeding and make defensible decisions before the administrator's phone is answered by everyone at once.

Hour 0–3: Verify the event and freeze the account

Begin by confirming what has actually happened. A notice of intention to appoint administrators is not the same as an administration appointment. Check Companies House, The Gazette and the insolvency practitioner's own website. If an appointment has been made, the company's affairs are under the control of the administrators. If only a notice has been filed, a moratorium may restrict creditor action, so take legal advice before attempting enforcement.

Next, place the customer account on stop. Ask sales and warehouse teams to hold new orders, cancel backorders and pause dispatches. Check the contract for insolvency termination rights and any continuing supply obligation. Do not rely on a verbal instruction from the customer's buyer.

Build a single exposure ledger. Include unpaid invoices by age, goods in transit, stock held at the customer's premises, deposits paid, work in progress, retentions and any other amounts at risk. Separate ordinary unsecured debt from goods that may be recoverable under retention of title. Keep the group small: managing director, finance lead, operations lead and sales lead.

Hours 4–24: Contact the practitioner and protect physical stock

Write to the insolvency practitioner once, clearly and concisely. Confirm the appointment, ask whether the business is trading, whether continued supply is required and what process applies to retention of title claims. Request a named contact and a reference. Avoid multiple calls from different departments.

If your terms include retention of title, check that the clause was incorporated into the contract before supply. Send a written demand identifying the goods, quantities, delivery dates and amounts outstanding. Ask the practitioner to confirm that the goods are ring-fenced. Do not enter the customer's premises without consent; recovery must be lawful and co-ordinated. If goods are still in transit, instruct the carrier to hold them pending instructions. Take legal advice where the value justifies it.

Any supply after appointment is a separate decision. If the administrator asks for continued supply, obtain written confirmation that the cost will be treated as an administration expense and agree payment terms, ideally cash on delivery. Do not allow old debt to be rolled into a new supply arrangement.

Update the cash forecast the same day. Assume no further receipts from the customer, then model the effect on the next 13 weeks. Speak to the bank early if the bad debt threatens a covenant or overdraft limit. Check whether credit insurance covers the exposure and notify the insurer within the policy deadline.

Day 2: File the claim and review the rest of the ledger

Prepare a proof of debt for the insolvency practitioner. Include invoices, statements, delivery notes, contracts and correspondence. Keep the claim factual and reconcile it to your ledger. If you supplied goods or services after the appointment at the administrator's request, present that amount separately as a potential administration expense. Ask for written acknowledgment.

Use the event as a prompt to review other customers, not as a reason to stop all credit. Pull current credit reports, check filing alerts and look for late payments, changing order patterns or requests to extend terms. Tighten limits where the evidence supports it. Consider deposits, staged payments or credit insurance for concentrated exposures.

Brief staff on a simple external line. Enquiries should be directed to one named person. Avoid speculation about the customer's position or the administrator's intentions.

Day 3: Record decisions and reset credit terms

Hold a short board meeting. Record the exposure, the decisions taken, the legal advice received and the revised cash forecast. Consider whether a bad debt provision is required and when VAT bad debt relief may become relevant; it is not an immediate fix. If the loss is material, reassess forecasts, lender covenants and supplier terms.

Reset credit terms for the wider customer base. Review standard terms for retention of title, insolvency termination rights and payment periods, and check that they are properly incorporated. Consider whether credit insurance, deposits or milestone billing should apply to customers with similar risk profiles.

Keep communication with the practitioner professional and proportionate. One clear claim, one stock recovery request and one supply position are usually more effective than daily chasing. Diary the proof of debt, any retention of title response and the next review date.

The first 72 hours will not resolve the insolvency. They should, however, stop a bad debt from becoming a stock loss and a cash crisis. Suppliers that act early, keep records clean and make one co-ordinated approach to the practitioner give themselves the best chance of recovering value and protecting the rest of the ledger.