SMEs weigh job cuts to ease cash flow
Research shows SMEs are struggling to stay viable
NEARLY 30pc of small businesses are considering job cuts to maintain financial viability, according to new research from the Association of Certified Chartered Accountants Ireland (ACCA Ireland).
In a survey of small and medium-sized accountancy practices that advise about 7,000 SMEs, ACCA Ireland found that most businesses are worried about sustaining cash flow, with many looking at reducing headcount to stay afloat.
Three-quarters of businesses cited cash flow as their biggest concern, compared to just 12.5pc who said the increased cost of doing business was the most pressing issue.
As a result, 29pc of SME owners are weighing up whether to let staff go to preserve cash and keep their businesses running.
The findings are indicative of the financial strain many businesses are under after nearly a year of the Covid-19 pandemic.
“The pandemic and Brexit support mechanisms provided by Government have been a welcome relief for many SMEs and the initiatives have been effective in alleviating pressures,” said Caitriona Allis, head of ACCA Ireland.
“However, challenges persist and business overheads such as rent and utilities remain a heavy burden on cash flow and there is growing concern amongst many SMEs that they will have to make redundancies in the coming months.”
More than 350,000 jobs across more than 36,000 employers are currently being subsidised via the State’s Employment Wage Subsidy Scheme (EWSS), which pays a percentage of payroll for businesses that have lost at least 30pc of turnover.
Covid-adjusted unemployment has also reached 26pc during the current lockdown, showing the significant stress businesses are under while many parts of the economy remain closed.
The challenges that many SMEs across the Irish economy face has seen the vast majority (94pc) of small accountancy practices increasing their workloads as they seek to help businesses mitigate the impact of the pandemic.
ACCA said its findings highlighted how cash flow problems inevitably affected a business’s ability to plan in the short and medium term.
“ACCA, as trusted advisors to SMEs, will continue to support Government by providing insights as they seek to address and balance the challenges of public health and the economy in unprecedented circumstances,” said Ms Allis.
Separately, insolvency practitioners have warned of a wave of examinerships on the horizon when Government supports for businesses are withdrawn later in the year.
Baker Tilly has said that many small businesses are being kept on “life support” by State subsidies and will need to look at debt restructuring to stay in business.
The Government is planning to create a simplified, standalone approach called the ‘summary rescue process’ for restructuring debts of such small and micro enterprises.