Zombie danger: Many companies are still in the dark

Despite the current difficult economic situation, the number of corporate insolvencies decreased last year – aid money is artificially keeping insolvent companies alive and thus creating so-called “zombie companies”. But, many companies do not yet have an overview of the threat lurking in their customer portfolio.

Creditreform assumes that 550,000 over-indebted companies could become zombie companies, and for 2021, even up to 800,000 are expected. The zombie companies will have an impact on the insolvency statistics at the latest after the regulations on short-time allowance expire: a currently still invisible wave of insolvencies is just rising, which will break eventually. In this expected flood of bankruptcies, some healthy companies are in danger of being dragged down into the depths, because sometimes suppliers or customers disappear quite unexpectedly. Depending on the industry or volume, the interdependencies are sometimes enormous, which can put entire industries in a precarious position.

A third of companies fear a threat from zombies

In a survey we conducted during a webinar on the topic of zombiefication, 30% of the participants stated that they see a threat from zombies in their customer base, 26% among suppliers.

zombie threat

Webinar recording: Safely through the crisis – With intelligent credit and receivables management

Due to the current situation, many companies are threatened in their existence. What does the impending wave of insolvencies and the increased probability of bad debts mean for your company and how can you protect your business? In our webinar (held in German) we provided answers to these and many other questions.

Watch the recording in German

zombie in portfolio

Therefore, it is currently even more important to monitor customer and supplier relationships carefully in order to recognise zombies at an early stage. But, 32% of all respondents stated that they had not yet checked their portfolio for zombies and 8% do not even know which indicators could be considered an early warning for zombification.

How to deal with the growing risks?

In order to identify potentially endangered companies, it may make sense to request a credit report as a first step, but the last annual financial statement reveals only little about the current situation.

It is rather the intuition and experience of the employees who deal directly with the respective customers that are needed now. Sales staff, for example, can become an important supplier of relevant information. Signs that a company is in financial distress can also be soft factors, such as the abolition of company cars or the sale of machines.

You can also get more detailed tips in our free whitepaper “5 tips for crisis-proof credit management in turbulent times”.

Get the whitepaper

It can also be helpful to develop your own scorecards with key figures tailored to the business partner. In particular, the company’s own data, such as the payment behaviour of customers, can be included here. Especially in times of crisis, credit management should not be regarded as an independent department and it can make sense for cross-company information to be collected centrally, for example by the receivables management experts. After all, requests for deferments, instalment payment plans and longer payment terms can indicate financial difficulties and thus allow rising risks to be identified at an early stage.

A credit management solution can help you keep an overview of the current risk in your portfolio at all times. With integrated interfaces to credit insurers and credit agencies, it provides the most important key figures and thus serves as a central information platform. Learn more about our credit management software:

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