Rise In Cashflow Stress

Covid has lengthened the time taken for businesses to get paid. Research by the Irish Asset & Invoice Finance Association shows that on average, firms are having to wait 64 days before being paid by their debtors, an increase of c.10 days compared with 2019. “The effects this has on cashflow are considerable, as it may force them to delay ordering new stock or have difficulties paying wages,” says association chairman David Avery.

Mark O’Rourke, managing director at Bibby Financial Services Ireland, suggests that cashflow finance specialists can provide a flexible source of funding. These options include invoice finance, which acts as a source of funding by releasing the value of a business’s unpaid invoices. Because it is not a loan, it doesn’t involve any additional debt. Equally, unlike taking out a business loan there are no fixed monthly repayments involved

“Trade finance should also be considered,” says O’Rourke. “This allows SMEs to buy, take possession of and sell goods before needing to pay for them. It also means that businesses can pay suppliers on the same day that goods are shipped – helping to smooth supply chains and get the cycle of payments moving again.”

Through 2020, there was a substantial uptake of invoice finance facilities by businesses, and sales turnover generated by companies using invoice finance reached €28.6bn. According to David Avery: “One positive we can take from the past year is an increased willingness to embrace new ways of managing cashflow. In the long run, this should bring greater financial stability to SMEs in particular.