When a critical supplier stops delivering
For many Swiss SMEs, a single supplier may be the source of irreplaceable components, certified raw materials, or essential logistics services. If that partner enters composition proceedings, is declared bankrupt, or stops deliveries without notice, the impact extends beyond procurement: it affects production, customer contracts, liquidity, and the balance sheet.
In Switzerland, insolvency procedures are governed by the Federal Act of 11 April 1889 on Debt Enforcement and Bankruptcy (SchKG; LEF in French). Bankruptcy may be declared at the request of the debtor, creditors, or the debt enforcement office. For the purchasing company, the priority is not to understand every procedural detail, but to protect operational continuity and correctly record the economic effects under Swiss accounting standards (CO and, for SMEs, typically Swiss GAAP FER).
This guide explains how to identify critical suppliers, what actions to take in the first hours and weeks, how to manage inventory and alternative sourcing, and which accounting entries and financial statement disclosures are typically required. The focus is operational and accounting, distinct from sales pipeline management or internal professionalisation of a family business.
Identifying truly critical suppliers
Not every supplier in difficulty puts the company at risk. A supplier is critical when its unavailability causes at least one of these effects within a short time horizon (typically 30–90 days):
Operational dependency
Components or materials with no immediate substitute, long qualification lead times, mandatory certifications (medtech, food, automotive), or exclusive contracts that limit alternatives.
Financial exposure
Advance payments made, inventory held at the supplier (toll processing, consignment), receivables from the supplier for returns or compensation, bank guarantees in favour of the partner, or contractual penalties owed to customers linked to delays.
Purchase concentration
Share exceeding 30–40% of a strategic purchase category, sole source for a high-margin item, or sole provider of inbound logistics into Switzerland.
Early warning signs
Systematic delays, requests for advance payment, frequent IBAN changes, publications in the Swiss Official Gazette of Commerce (FU), entries in the debt enforcement register, or communications regarding composition moratorium (Art. 293 et seq. SchKG).
In Accountex, it is advisable to link supplier master data to criticality indicators (volume, uniqueness, open advance payments) and monitor payment due dates alongside inventory: a critical supplier is not just an accounts payable line item, but a node in business continuity.
Swiss legal framework: what changes for the buyer
When a supplier is in proceedings, the company's rights depend on the procedural stage and legal title to goods and payments:
| Situation | Typical effect for the purchasing SME | Operational priority |
|---|---|---|
| Composition proceedings (Art. 293 et seq. SchKG) | Suspension of enforcement actions; possible continuation of business under a composition plan | File claims (advance payments, damages) with the composition administrator; negotiate deliveries within the plan |
| Bankruptcy (SchKG) | Freezing of assets; unperformed contracts may be terminated by the trustee | Stop payments to the bankrupt entity; verify title to goods already paid for; activate alternative suppliers |
| Open orders, undelivered goods | Right to delivery subordinate to the proceedings; risk of mutual non-performance | Document orders and payments; assess contract termination (Art. 107 et seq. CO) |
| Advance payments and goods held by third parties | If ownership has not transferred, goods may form part of the bankruptcy estate | Gather proof of ownership (Incoterms, DDP/EXW, contractual clauses on buyer ownership) |
| Toll processing / consignment stock | Buyer's materials at the supplier: urgent claim against the trustee | Photographic inventory, delivery notes, labelling; coordination with lawyer and trustee |
Cantonal differences mainly concern the organisation of debt enforcement offices and procedural timelines, not substantive principles. In cases involving significant amounts or strategic goods, support from a lawyer specialising in insolvency is advisable from the first notification.
Intervention plan for the first 72 hours
Speed of response determines how much inventory remains usable and how much credit is recoverable. An effective sequence for a Swiss SME:
- Block payments and assess exposure. List open invoices, advance payments, expected credit notes, and guarantees. Suspend transfers to the bankrupt supplier except on instructions from the trustee.
- Quantify inventory and coverage. Calculate production days covered by own warehouse stock, work-in-progress at the supplier, and orders in transit. Identify the breaking point for each product line.
- Contact the composition administrator or bankruptcy trustee. File the claim for admission to the bankruptcy estate with documentation (contracts, orders, proof of payment). Separately assert claims to any goods owned by the buyer.
- Activate alternative sourcing. Contact secondary suppliers, brokers, or foreign manufacturers; temporarily consider compatible components subject to quality validation.
- Inform customers and internal teams. Proactive communication on possible delays, renegotiation of delivery dates, and prioritisation of the most profitable or contractually sensitive orders.
- Align accounting and audit. Record provisional write-downs, provisions, and disclosure notes for the interim or annual financial statements.
Alternative sourcing: options and trade-offs
Replacing a critical supplier rarely happens overnight. The most common routes for manufacturing and service SMEs in Switzerland:
Pre-qualified dual sourcing
Ideal scenario: a second supplier exists in the ERP system, with known prices and lead times. Temporarily increase volume, even at higher cost, to stabilise production.
From an accounting perspective, new purchases follow the ordinary flow; any higher unit costs affect the period margin (account 4 or 5 depending on the chart of accounts).
Foreign supplier or broker
Useful for standardised components. Pay attention to customs, import VAT, certificates of origin, and sector requirements (SECO, Swissmedic, etc.).
Allow for additional logistics costs and possible capital tie-up for higher safety stock levels.
Temporary in-house production
Subcontracting of capacity, overtime, or reactivation of internalised processes. May require minor investments in equipment or licences.
Costs should be capitalised only if they meet CO criteria for fixed assets; otherwise they are period costs.
Selective asset acquisition
In composition or bankruptcy, the trustee sometimes sells inventory, moulds, or contracts. Assess rapid due diligence and VAT impact (Art. 38 VAT Act, notification procedure, for transfer of a business activity in certain cases).
The transaction should be recorded separately from receivables against the bankrupt supplier.
Inventory management during a supplier crisis
Inventory becomes the main buffer until new sourcing stabilises. Three operational levers:
Rationing and prioritisation. Define clear rules on which customer orders to fulfil first based on margin, penalties, strategic importance of the relationship, and availability of substitute components. Document decisions for potential disputes and for the statutory audit.
Targeted safety stock. Temporarily increase minimum levels only on items at risk of stock-out, not across the entire catalogue. Monitor liquidity tied up in inventory: in a supplier crisis, inventory often grows as a defensive measure, but liquidity remains constrained.
Physical inventory and traceability. Conduct accelerated counts on critical components; verify batches, expiry dates, and contractual constraints (e.g. materials licensed by the bankrupt supplier). If the supplier held inventory belonging to you, separate it accounting-wise and physically as soon as it is recovered.
Accounting impact under Swiss standards
A supplier crisis almost always triggers value adjustments and financial statement disclosures. Under Swiss GAAP FER and the CO, recurring items include:
| Item / situation | Typical accounting treatment | Note for the SME |
|---|---|---|
| Non-refundable supplier advance payments | Write-down to loss or reclassification from current assets; possible clearing account until the trustee's decision | Document the expected recovery rate; revaluation only if new concrete information emerges |
| Receivables from the bankrupt supplier | Provision for insolvency; filing in the bankruptcy estate | Do not unilaterally offset against payables to the same supplier without legal basis |
| Inventory tied to an exclusive supplier | Impairment test if net realisable value falls (obsolescence, lack of spare parts) | Usual method: cost or net realisable value, whichever is lower |
| Requalification and urgency costs | Period costs (express freight, overtime, consulting fees) | Dedicated cost centres facilitate post-event analysis and budgeting |
| Penalties to customers and compensation | Probable liabilities if the obligation is legally founded or economically unavoidable | Provision net of any insurance recoveries |
| VAT on advance payments and substitute imports | Verify deductibility and correctness of periodic returns; watch for credit notes not issued by the bankrupt entity | Coordinate with the VAT advisor on any corrections |
Subsequent events after year-end (payments from composition, partial recovery) should be recorded in the period in which they occur, with possible adjustment of prior estimates. In the management report and notes to the financial statements, it is advisable to describe the event, its impact on going concern, and measures taken — a disclosure requirement particularly relevant if exposure is material relative to net assets.
For companies subject to ordinary or limited statutory audit, align promptly with the auditor: many write-downs require documentary evidence (correspondence with the trustee, appraisals of obsolete inventory, customer letters on penalties).
Prevention: reducing dependency before a crisis
After stabilisation, it is worth formalising controls that reduce the risk of recurrence. A pragmatic model for Swiss SMEs includes monitoring the FU and debt enforcement records for the top 20 suppliers by volume, contractual clauses on lead times and penalties, limits on advance payments (milestone payment or escrow), qualification of at least one alternative supplier for A categories, and a semi-annual review of the criticality map integrated in Accountex alongside tax deadlines and cash flow.
Digitising procurement master data — linking open orders, advance payments, and stock levels — allows you to simulate the effect of a single disruption on production and liquidity requirements, without waiting for official bankruptcy notification.
Summary checklist for procurement and accounting managers
- ☐Updated critical supplier map with credit exposure and inventory coverage days
- ☐Payment suspension and documentation collection for bankruptcy estate filing
- ☐Assertion of own goods held at the bankrupt supplier
- ☐Alternative sourcing plan with timelines, costs, and quality validation
- ☐Customer communication and register of penalties or contractual delays
- ☐Write-down entries for advance payments, receivables, and at-risk inventory
- ☐VAT review and coordination with tax advisor / auditor
- ☐Financial statement note on the event and post-crisis mitigation measures