Although the economic downturn in Canada has not reached near the levels it has in the United States, small and medium-sized businesses need to pay close attention and safeguard themselves from any customers and suppliers wavering on the brink of financial collapse, says Michael MacNaughton, a partner in the Toronto office of Borden Ladner Gervais LLP (BLG) and member of the Firm's Insolvency and Restructuring Group.

'It's not clear to me … that people are focused on the issue,' says MacNaughton. 'I think they should be. You need to be vigilant about the circumstances of your customer and able to act if you have to.'

Insolvencies in Canada have risen a whopping 20 per cent from January 2008 to January 2008, according to the office of the Superintendent of Bankruptcy. Taking steps, such as shortening the credit leash, considering creditor insurance and reducing the 'aggregate exposure' you are willing to extend to customers, may just enable businesses to weather this economic storm — even when those around them aren't.