Protecting cash flow when customer insolvency strikes
Businesses operating in labour hire for construction and engineering, often face cash flow pressure. They also face increased exposure to key customers when a significant portion of receivables sits with one debtor. An unexpected insolvency can quickly become a serious threat to cash flow and continuity. A Western Australian business supporting industrial and construction-related projects, had the foresight to strengthen its invoice finance facility with an Octet Buyer Protection policy.
$500,000
Debtor & Invoice Finance
$100,000
Buyer Protection
For businesses operating in project-based sectors such as labour hire for construction and engineering, cash flow is often under constant pressure. Staffing, equipment, supplier and operational costs need to be paid on time, while customer payments can take weeks or months to arrive.
That gap between completing work and receiving payment can create working capital strain, particularly when a business is growing or taking on larger contracts. It can also increase exposure to key customers. When a significant portion of receivables sits with one debtor, an unexpected insolvency event can quickly become more than an unpaid invoice. It can become a serious threat to cash flow, confidence and continuity.
One Octet client, a Western Australian business supporting industrial and construction-related projects, had the foresight to strengthen its invoice finance facility with Buyer Protection.
The challenge
For several months, the client’s customer-base paid without issue. Trading conditions appeared stable, and payments were being managed as expected.
Then the unexpected happened.
A key customer was placed into liquidation, leaving more than $113,000 in outstanding receivables owing to the client.
For many businesses, a loss of this size can be extremely difficult to absorb. It can reduce available cash, place pressure on payroll and supplier commitments, and limit the ability to take on new work. In project-driven industries, where margins and timing matter, one unpaid debtor can quickly affect the broader business.
The solution
Fortunately, the business held a $500,000 OctetDebtor invoice factoring facility supported by Buyer Protection. This meant the client could access working capital tied up in receivables while also helping protect against the risk of bad debt if an approved customer became insolvent or failed to pay.
Once the liquidation event occurred, Octet acted quickly. The insurer was notified promptly, and the required claim documentation was gathered and submitted as it became available.
This speed mattered.
“In a customer insolvency scenario, businesses need more than policy wording. They need a structured, responsive process that helps keep the claim moving and reduces uncertainty at a stressful time.”
Nigel ThayerDirector Working Capital Solutions WA - Octet
The claim was lodged and progressed efficiently, with approval received within weeks of the liquidation event. Following approval, funds were paid to Octet and then transferred to the client’s account and applied to invoices.
The final claim payment totalled $85,500, based on the approved Buyer Protection limit, applicable excess and 90% coverage.
By combining OctetDebtor with Buyer Protection, the client had both working capital support and a financial buffer against an unexpected customer failure.
The result
The outcome was significant.
What could have been a major cash flow disruption was instead managed through a fast, structured claims process. The Buyer Protection payment helped reduce the impact of the customer insolvency and supported continuity for the client at a critical time.
For the client, the protection provided real peace of mind.
“A potential loss of around $100,000 would have been difficult to recover from and could have placed material pressure on the business,” says Nigel. “Having Buyer Protection in place meant the business was better positioned to manage the event and keep moving.”
The story is a clear example of how Octet helps businesses do more than access funding. Through solutions such as Buyer Protection, Octet can help clients protect receivables, reduce exposure to key customers and trade with greater confidence.
Customer insolvency can happen quickly and without warning. But with the right finance structure in place, businesses can be better prepared.
For businesses looking for debtor and invoice finance, or have an existing facility, adding Buyer Protection can provide an important additional layer of security.
Talk to our working capital specialists today about how we can help protect your business’s cash flow when it matters most.
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Disclaimer: The above article content and comments are our views and should not be construed as advice. You should act using your own information and judgment. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgment as at the date of publication and are subject to change without notice.
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