It was a day everyone at the mid-sized southwestern Ontario manufacturing firm would remember for years to come.

The company's sales team had just managed to land a big account that would double, or possibly even triple, revenue almost overnight.

Office staff went out to a nearby pub after work to talk about the promotions and raises that were promised.

Everyone thought of how the good times were about to get even better.

"We sure did celebrate the day we got that news," says Mike, the company's president (he asked Business Edge not to use his last name). "I remember how I watched that first shipment rolling off the line and thinking how I could finally get that new Porsche I always wanted; how the wife and I could afford to take a vacation now.

"Too bad it didn't last long."

The first few invoices went out to their new client, and Mike waited for payment.

When they called to ask about it, accounting staff were on vacation. Cheques were waiting for a signature. Thirty days quickly turned into 60 and eventually 90 days. A troubling pattern was starting to develop.

It's an all-too-common situation with small- to medium-sized businesses across Canada.

In a free online guide for Canadian businesses, accounting and business advisory firm Grant Thornton LLP outlines 10 strategies that businesses should implement during tough times, including putting a greater focus on receivables.

"Monitor accounts receivable aging and quickly address any problem accounts that are past due," advises the report, called The Credit Crunch: A Practical Guide. "Request regular financial information from your largest customers to identify and evaluate risk.

"Don't assume your customers or suppliers are financially healthy. Look for red flags of distress. Failing to promptly collect receivables may result in a cashflow shortfall that could affect all areas of your business."

The country's recession-battered manufacturing sector is particularly vulnerable these days, says Rob Biehler, an associate partner with Deloitte Financial Advisory Services, just west of Toronto.

"It's really a fine line, because when do you stop taking a friendly approach and put the account in collections?" he asks.

"If you do that, you risk ruining the great relationship with the client. But if you don't take a strong approach at some point, receivables start to get out of control and it can affect cashflow.

"You should remember that most suppliers are typically on an unsecured basis, which means you are the last on the list to get paid out of bankruptcy or any other judgment."

Mike kept the situation a secret from his staff as long as possible. "I didn't want them to panic and start looking around for other jobs," he says. "It was great we had this big new client, but cashflow really took a big hit when they didn't pay their bills."

One option is to take delinquent suppliers to your local small claims courts - but these usually cap the amount that can be awarded. And Biehler says after weeks of waiting, even if the courts order someone to pay, the supplier can stall by claiming no assets.

"It's where the term 'blood from a stone' comes from," he adds. "If there are no assets, then it's what we call a hollow judgment."

Biehler says he suggests clients "get close" to their customers. "If you start to notice any sort of a change in behaviour, like someone paying at 45 days rather than their usual 30 days, that would be a warning sign of liquidity or capital changes.

"Call and find out the reason why. Ask for a meeting so you can understand their situation more," he says.

But Knud Jensen, a professor at Ryerson University's Ted Rogers School of Business Management in Toronto, says it's a mistake to just focus on the list of receivables.

"Anything that affects your liquidity should be watched," he says. "I know one company that increased their line of operating credit with the bank several years ago. Right now, they have plenty of cashflow to ride things out.

"If they had tried to apply for the same credit now, they would get turned down," Jensen adds.

"It's another mistake to think big companies that have been around for a while will have no problem paying their bills. Just look at all the problems GM is having right now."

By the time Mike realized what was happening, it was too late.

He had spent most of the past decade building the company and it was about to come crashing down over a few short weeks because of that customer who didn't pay his bills.

Paycheques bounced. Their own suppliers were being paid later and later.

In late January, Mike did the only thing left - declare bankruptcy.

"I wish I had been tougher on overdue accounts sooner," he says. "I just sat and cried when I realized we had to declare bankruptcy."

He wasn't alone. Statistics Canada reported in January that Ontario lost 198,000 manufacturing jobs - almost one in four - during a four-year period from 2004 to 2008.

The province's auto-manufacturing sector was the biggest reason for the decline.

Across the country, Canada suffered its worst monthly job loss in at least three decades in January as 129,000 more workers became victims of the economic slump.

The job losses were felt in every region of the country and impacted almost all industries, as the unemployment rate soared to its highest level since November 2004 at 7.2 percent, from 6.6 percent in December.

Just west of Toronto, business information provider Dun and Bradstreet keeps credit records on 140 million companies located around the world, covering 95 different languages and 181 currencies.

The key for businesses is to develop a collection plan in advance, says Canadian marketing manager Jeff Yee.

"Develop a plan based on cashflow," he advises. "If something is five to seven days past due, send a reminder. After a couple of weeks, they automatically get a phone call to reach out to them.

"This needs to be scheduled automatically so nobody falls through the cracks and you're fair to everyone," he says.

- with files from The Canadian Press (David Hatton can be reached at hatton@businessedge.ca)