Three quarters of businesses lose out after customers hit problems New research from Nottingham-based data company Experian found that over the past five years 76pc of UK SMEs lost money when their purchaser collapsed. Failing to understand a customer's financial position has proved costly to a large swathe of small and medium-sized businesses, the study found. Ade Potts, managing director at Experian, said: "Although over half of SME owners said that they did check their customers" and suppliers" credit ratings once a year, this is not often enough to identify potential problems." "The rate of deterioration is far quicker for companies in today's climate, so the sooner you can spot the signs of financial stress, the sooner you can react," he added. Experian's report revealed that only 34pc started monitoring suppliers after they had already lost money. However, the true cost is the domino effect, in which small and medium-sized companies go down with the failed buyer. According to Richard Fleming, partner at KPMG, SMEs can only protect themselves against customer insolvency by taking out trade-covered insurance or maintaining a very close supplier-customer relationship. SMEs have a big dependency on a small number of customers. Unlike large companies, they don't have the balance sheet or reserves to withstand the shock," he said. Mr Fleming said that there was currently a hiatus of SME insolvencies but when interest rates rose and the economy recovered, bringing with it demand for big orders, this trend would reverse. "SMEs find it hard to say no but coming out of recession cannot necessarily deal with the demand for big orders which the business often cannot finance," he concluded.