SMEs dependent on single customer

More than 350,000 small and medium sized businesses rely on a single customer for over 75 per cent of their turnover, highlighting their vulnerability to bad debt according to a recent survey.

The survey of over 500 SME owner managers by Close Invoice Finance, part of merchant banking Group Close Brothers, also found that more than three in five SMEs have no insurance to protect against customer default.

David Thomson, Chief Executive Officer of Close Invoice Finance said: "By relying heavily on one single customer, companies put themselves at serious risk of business failure should this customer fall into financial difficulty. Simply, this means one company's financial downfall can mean bad debt has a domino effect and will precipitate another business' collapse."

The domino effect of bad debt is highlighted by the drastic increase in the number of companies going into liquidation.

According to figures from the Insolvency Service, 4,607 companies went into compulsory liquidation or creditors' voluntary liquidation during the fourth quarter of 2008 in England and Wales. This is a rise of 11.9 per cent on the previous quarter and an increase of 51.6 per cent on the same period a year ago.