Hong Kong Company Closures Surge: Why Suppliers Must Act Fast to Protect Receivables

​Hong Kong has recorded an unprecedented surge in company winding-up cases during the first half of this year — the highest level in the past decade and more than double the ten-year average. In this blog, we will share a Case Study on Safeguarding Cash Flow in a Challenging Market.

​​The wave of closures has cut across industries, with food & beverage, retail, and construction sectors hit the hardest. Even long-standing corporates such as Hang Seng Bank, Dairy Farm and Estee Lauder’s Hong Kong office announced workforce reductions, triggering widespread layoffs. 
 
This sharp contraction creates a vicious circle: layoffs dampen consumer spending, which in turn accelerates further business failures. While listed companies may show warning signs in their financial statements, many medium-sized private firms — often overlooked by suppliers — are equally vulnerable. When these companies collapse, recovering outstanding receivables becomes extremely challenging. 
 
To mitigate the risks, suppliers should adopt strict precautionary measures. Key steps include: 
  - Conducting due diligence and negative checks on key accounts and new customers as part of robust KYC policy. 
  - Responding quickly when customers delay payments, initiating collection efforts before arrears spiral into insolvency. 
 
At RMS, we help businesses stay ahead of risk and maximize cash recovery even in this turbulent market.  

Case Study: Safeguarding Cash Flow in a Challenging Market  ​

​Background 
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A premium food supplier serving high-end cuisine chains—including Italian, Japanese, Thai, and European fusion restaurants—was facing a surge in accounts receivable (AR) delinquency. Despite their reputation for quality products, an increasing number of clients delayed payments, while others abruptly ceased operations or entered liquidation. These defaults not only eroded profits but also created severe cash flow risks. One of the biggest challenges was the lack of early warning signs—financial stress among their customers often became visible only after business closures, making recovery nearly impossible.  

RMS Solution 

To address this, the supplier partnered with RMS, implementing a structured cash flow protection strategy: 
1. Due Diligence: RMS conducted a comprehensive financial “health check” on the client portfolio through credit assessments and negative record screening, helping to flag at-risk accounts before problems surfaced. 
2. First-Party Collection: For accounts with high balances overdue 60+ days, RMS deployed professional reminder call services, improving early recovery and customer communication. 
3. Escalated Collection: Accounts with adverse legal or Third-party debt collection records, and overdue balances of 90+ days, were immediately escalated to RMS’s third-party collection services to maximize recovery chances.  

Result 

With RMS’s support, the food supplier regained stability and confidence in managing receivables. Their Days Sales Outstanding (DSO) fell sharply from 60 days to under 30 days, freeing up working capital. This enabled the company to focus on growing its customer base and delivering quality services, instead of being burdened by escalating AR risks.  
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