Strengthen Your Business

6 Things Businesses Need to Know for the Looming Debt Apocalypse

Accounts Receivable  |  5 min read

The news story that broke is unequivocal: Canada is on the brink of a debt crisis, and no one seems quite sure what to do about it.

As a people person, statistics don’t often raise my pulse. This one was impossible to ignore because of the breadth of scope. According to a national survey by MNP, Canada’s largest insolvency firm, fully half of all Canadian households are now within $200 a month from insolvency. Nearly as many respondents (49%) say they aren’t confident in their ability to cover expenses without going deeper into debt. According to MNP President Grant Bazian, a psychological change is taking place in Canadian consumers. And it’s an alarming one.

“Our findings may point to a shift among some Canadians from debt apathy to debt hopelessness,” Mr. Bazian said in a press release. “Feelings of hopelessness can make people feel like giving up on ever paying down their debt or, worse, ignoring the debt as it piles up higher.”

You might expect to see the “stressed about debt” number match the percentage of people close to insolvency. But while half of Canadians are on the brink of insolvency, only one-third of those individuals are worried about it.

Now THERE’S the piece that should concern every business owner and AR manager.

Where your customers are physically located is relevant in terms of that ratio of people within $200 of missing their monthly bills. In Ontario and the Maritimes it’s 46%; Alberta is 48%—and in Saskatchewan and Manitoba, a whopping 56% of people are operating within that razor-thin $200 threshold.


In spite of the warnings and despite their unpaid bills, consumers are still buying things. That’s a small bright side for your business—for now.

The reality is that half of your Canadian customers are just a day or two’s pay away from having to decide if other creditors’ bills are more important to pay than yours. And of those customers, almost half say they’ll increase their debt to pay their debt in 2022.

When it hits the fan for your customers, many are going to re-prioritize. Your job right now: to position your business to be central among those priorities. Here are 6 ways to do that:

1. Check your data and records.

You have a lot of data. Your accounting software can filter invoices and contracts to identify past-due accounts. Set up a dashboard so you know the moment a payment is past due. If your team doesn’t have a collection process that’s working well, it’s time to start using a good collection agency. An invisible clock starts ticking the moment your customer misses a payment. After 90 days, your outstanding invoice has lost a large chunk of its value; it continues to shrink in value until its collected or expires. Tip: use this Debt Recovery Calculator to see the value of your receivables in real-time. 

2. Update Your Contracts

Products change. Warranties change. Laws and regulations change. Make sure your contracts, invoices, and legal paperwork is current and appropriate to the way credit is granted today. I’ve seen companies whose own contracts work against them because they’re out of date or overly simple to offer any real protection or recourses. Technology has made financial transactions so easy that we often rely on the computer to do its job. We assume problems will resolve themselves and AI has got our back. With computers, it’s still garbage in/garbage out. Ineffective or weak contracts are hard to fix once the bills are overdue.

3. Make It Easy To Pay

One thing businesses should do more is talk to their customers. An important thing to discuss is how they prefer to pay their invoices. Mobility has made payments anywhere/anytime payments on the go possible. Few of us carry as much cash as we used to—if even at all. For those rare occasions when a transaction is “cash only,” it’s like saying, “your money is no good here,” because most Canadians’ money is electronic. Hard cash is not only less common, the data reminds us it is in short supply. It’s a little extra work to get multiple payment processes in place, but it’s minor. Payment providers have come a long way in making their services more friction-free for you and your customers. You’ll have made it easier for your customers to make a payment. Reducing payment friction can put you on the “I’ll pay THIS one first” list. The top of the list—or better yet the Paid pile—is where you need to be.

4. Set Shorter Payment Terms

Payment terms vary by industry. Some large-scale manufacturing and resource industries have a universal 90-day payment term as the norm. I’ve submitted invoices and been told payment would be 90 days—or even more. There’s no harm in asking for 30 day payment terms—reasonable and predictable for cash flow. Tell the supplier it’s your policy. You probably aren’t in the business of financing other enterprises—and if you are, it should never be interest-free. And if an existing customer asks for extended terms—consider it very carefully. Extra time is not only a stretch of your resources but one of the warning signs that a business may be in cash trouble.

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5. Automate Payment Reminders

Often, a missed payment was just… missed. Someone forgot, or the email was marked “read” without the attachment going into the payables. No big deal. Other times, it’s exactly the latent headache it seems to be. If your accounting software doesn’t have automated late payment reminders, change software. If the reminders go ignored, hit the phone—and escalate quickly.

6. Be Hyper-Proactive 

In ordinary times, it’s important to jump on overdue receivables like a hungry dog. And when cash becomes scarce, everyone is a hungry dog. The competition to collect is fierce, and when consumers and businesses alike continue spending more money than exists, not all creditors will get paid. The ones who do will be those with sound AR practices—which include a professional collection partner.

For business owners in the B2B space, the big problem I see with the debt crisis is in the attitude: “it’s only consumers.”

Those consumers populate and operate every Canadian business. Personal debt will impact every entity’s finances, from sole proprietorships and small businesses on up. Likewise, stress over personal finances motivates business owners to make irrational or unwise choices that deplete or draw excessively from their business. Insufficient money to go around is never only a consumer problem—especially inside a small economy.

There is a very real debt bubble in Canada, and it’s the biggest we’ve seen in years. Now is the time to put the pieces in place to protect yourself.

Still, there’s no need to panic. (That never helps, especially when disaster DOES strike.) Take the above steps, and give me a call or reach out on Linkedin with any questions. As a nation, Canadians are resilient, and we can get through this together.

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Brian Summerflet Author: Brian Summerfelt

President and CEO of MetCredit, Canada's top-performing consumer and commercial collection agency

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