With corporate bankruptcies increasing by 60% over the past 12 months, companies want to avoid getting dragged down by the failure of customers–especially key ones that might owe significant amounts of cash.

There are important early warning signs to look for, as well as steps companies can take to minimize losses if a customer goes bust, says attorney Rhett Campbell, who heads the corporate reorganization and creditors rights practice at Thompson & Knight in Houston.

Pay attention to bounced checks, chronic payment delays, layoffs or management turnover, news of distress in particular industries, sudden attempts to resolve outstanding payment or delivery issues, or the sale of a profitable division, he advises. "These are all warning signs of trouble at a customer's company," he says, "and they tell you that you need to take steps to protect yourself."

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