In 2023, a mid-sized Swiss manufacturer lost a major German customer that accounted for over 40% of its turnover. Within six months, it couldn’t pay suppliers on time, employee confidence eroded, and its bank downgraded its risk profile. By early 2024, the company was insolvent.
It’s a familiar pattern, one that quietly repeats across Switzerland every year. In 2024, Switzerland experienced a record number of company bankruptcies, totaling 17,036 cases. According to recent data from CRIF, this trend continued with an 8.4% rise in bankruptcies during the first quarter of 2025.
Business failure is rarely the result of a single mistake. Often, it's the consequence of accumulating financial risks that were either underestimated or not addressed in time. This article explores the top reasons why companies go bankrupt and help you know how to spot them early.
Customer concentration: one client too many
Relying on a few large customers can be financially efficient — until it’s catastrophic. A Swiss wholesaler exporting precision tools to Italy discovered this when its top buyer went into administration. Since the buyer represented 50% of the wholesaler’s revenue, the impact was immediate: cash flow dried up, and the firm struggled to cover operational costs.
The sequence is always similar. First, a dominant client starts delaying payments. This triggers a liquidity crunch. Soon, the supplier must negotiate longer terms with its own creditors. If that fails, internal costs are cut — often staff and quality — which then weakens competitiveness. Eventually, the company spirals into insolvency.
Warning signs usually appear months in advance. Payment delays, smaller order volumes, and changes in the client’s leadership or ownership are early red flags. Another common sign is increased pressure from the client to extend payment terms.
Diversification is the only reliable buffer. Swiss SMEs should cap client dependency to 20-25% of revenue and monitor customer risk via financial information tools like Coface’s Debtor Risk Assessment reports. Trade credit insurance also plays a critical role in shielding against default losses.
Weak cash flow management
A company may look profitable on paper but still go bankrupt due to poor cash flow. This happens when incoming cash doesn’t align with outgoing payments. For instance, a Basel-based digital agency faced bankruptcy after a period of rapid growth. They hired aggressively but failed to match that with fast enough collections.
Typically, poor cash flow begins with optimistic forecasting. Businesses assume payments will arrive on time and commit to costs too early. When clients delay or dispute invoices, liquidity evaporates. Loan repayments and supplier dues begin to stack up. Without external financing, even healthy companies collapse under the weight of temporary mismatches.
Early signs include frequent short-term borrowing, missed supplier discounts due to late payments, and increasing dependence on factoring. A CFO constantly requesting liquidity updates is another subtle signal.
Swiss SMEs can mitigate this risk with rolling 13-week cash flow forecasts and clear DSO (days sales outstanding) targets. Tools like Abacus or Bexio provide real-time insights. CFOs should also maintain strong banking relationships before they need support.
Poor management and decision-making
Family-run businesses dominate the Swiss SME landscape. But internal conflicts, unclear responsibilities, or outdated leadership can pose serious risks. We got to know the case of a textile distributor where two brothers disagreed over reinvestment vs. dividend policy. While the dispute dragged on, product lines stagnated and key accounts left. The firm filed for bankruptcy.
When key decisions are delayed or politicized, the business lacks strategic agility. Important investments don’t happen, processes aren’t modernized, and talent leaves. Over time, even a solid business model can decay.
Red flags include recurring disagreements at the board level, high staff turnover, and consultants being hired to resolve basic structural issues. Another sign is the absence of external auditors or independent directors.
To counteract management risk, Swiss SMEs should adopt structured decision-making with clear escalation paths. Including external board members helps balance views and ensure objectivity.
Expanding too fast
Growth is attractive, but poorly managed growth is a bankruptcy accelerator. A health tech startup expanded into three EU markets within a year. But their internal systems couldn’t handle the complexity. Inventory losses, poor cash collection, and compliance penalties followed. Within 18 months, the firm ran out of cash.
The chain reaction starts with overestimation. Leadership believes success in one market guarantees success elsewhere. Operations are stretched thin, and oversight suffers. Budget overruns grow, yet market returns take time. Eventually, debt piles up, suppliers lose confidence, and capital becomes scarce.
Watch for signs like regular deviations from budget, slow month-end closings, or growing receivables in new markets. Increasing complaints from customers or auditors flag deeper issues.
Measured growth is key. SMEs should enter new markets in stages, with clearly ring-fenced teams and budgets. Use third-party logistics and legal partners to scale capacity without fixed cost overhead. Switzerland Global Enterprise provides market entry support tailored to Swiss firms.
External economic shocks
Even well-run companies can fail when macroeconomic shocks hit. During the COVID-19 pandemic, a Swiss-based event logistics firm lost 90% of its revenue in six weeks. They had no cash buffer, and government aid came too late. They filed for bankruptcy within three months.
These shocks typically impact revenue instantly while fixed costs remain. Companies must pivot fast — but those with rigid models or high debt can’t adapt. What begins as a shortfall becomes a solvency crisis.
Early signs include a steep drop in inquiries, cancellations of contracts, or inability to renew insurance. Sometimes, suppliers or banks reduce exposure quickly, revealing how risk is perceived externally.
Supply chain disruptions
A component maker went bankrupt because its key Chinese supplier failed to deliver for eight weeks. With no alternative supplier and contractual penalties from clients, the organisation couldn’t absorb the shock.
These events often begin far from your own operations. A strike in a port, a political crisis, or a natural disaster disrupts one node. If companies lack redundancy or stock buffers, production stops. Clients go elsewhere, and the revenue loss is unrecoverable.
Indicators include delays becoming more frequent, increasing freight costs, or sudden quality issues. Another signal is over-reliance on a single logistics partner.
Swiss-based firms must diversify sourcing and conduct supply chain audits. Including performance clauses and penalties in contracts with suppliers can also protect continuity. Platforms like Resilinc offer visibility tools to pre-empt issues.
Misjudging international risk
Swiss-based exporters often assume stability in Western markets, but even there, legal and payment systems vary. A machinery firm lost millions when an Italian buyer defaulted. The contract was under Italian law, and enforcement took years.
Problems begin with unfamiliarity. SMEs enter deals without proper due diligence, rely on local agents without vetting, or use boilerplate contracts. When disputes arise, costs spiral.
Red flags include buyers pushing for unclear terms, frequent amendments to agreed payment plans, or sudden changes in ownership.
Risk intelligence at an international level is key. Use tools like Coface URBA360 to vet partners. Having contracts vetted by local counsel and choosing Swiss jurisdiction can prevent long legal battles.
Conclusion: proactive risk awareness is vital
Swiss-based SMEs are often admired for their resilience and quality. But bankruptcy rarely comes out of nowhere. Whether due to poor planning, external shocks, or overreliance on a single buyer, the signs are usually there. The companies that survive — and thrive — are those that stay vigilant.
Don’t wait until the crisis hits. Use risk analysis tools such as URBA360, diversify your exposures, and build a culture of transparency across finance and operations.
