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Almost 50% of Irish businesses waiting 3 months to get invoices paid!

As reported recently in the Irish Times almost half of Irish businesses are waiting more than three months to get paid money from at least some of their customers, according to a new survey.

In general, businesses are waiting longer to get paid in Ireland, according to the InterTradeIreland Business Monitor , which shows cash flow is currently one of the biggest problems for firms North and South.

Only 4 per cent of Irish businesses have terms that allow 90 days’ credit.

InterTradeIreland spoke to more than 1,000 SMEs across the island to compile the Business Monitor . Nearly half (47 per cent) of all the businesses contacted said they were “contracting, fighting for survival or winding up” with the construction, retail and small firms sectors feeling the pressure most.

 

Banks still squeezing credit to small and medium businesses

The overall volume of credit extended to SMEs continued to contract last year despite the pick-up in the economy.

Banks are continuing to squeeze lending to small- and medium-sized enterprises, figures just published by the Economic and Social Research Institute (ESRI) show. The reality is that credit is shrinking despite new lending from Irish banks because repayments are continuing to outpace new lending.

Lending to SMEs fell by a combined 10.5 per cent in 2014, a net flow of minus €3.1 billion, where repayments exceeded drawdowns. This leaves many SMEs starved of adequate working capital.

A report published with the institute’s Quarterly Economic Commentary shows that one in nine such businesses were either refused a loan because the banks are rationing credit or did not apply in the first place as they believed they would be rejected.

Bank lending to small- and medium-sized enterprises (SMEs), which account for the bulk of the businesses and employment in the Republic, fell by 2.8 per cent last year with lending to sectors outside financial services, construction and property, down 5 per cent in the last three months, the ESRI’s figures show.

It estimates 39 per cent of SMEs applied for credit between April and September. One fifth – representing 9 per cent of all firms operating in the Republic – were rejected.

Of those, the authors believe that the banks rejected close to half the applicants, because they have a policy of not lending to particular sectors, rather than on the merits of the individual applications.

This practice is known as “credit rationing”, and adds that sectors such as hotels and restaurants, construction, property and small businesses with no export markets, appear to be suffering most as a result of this policy.

 

Cash flow management

Research shows that companies are offering settlement discounts starting at 2.5% in an effort encourage their customers to pay within 30 days of invoice. Some are offering a much as 5.0%.

As pointed out by Mary S. Schaeffer, author of "Controller and CFO's Guide to Accounts Payable" and other business books, the offering a 2% settlement discount for payment within 10 days of invoice equates to a whopping 36% APR cost.

Irish companies that previously considered, or used, invoicing discounting are now finding it prohibitively expensive and no longer sustainable. As one company director recently said "its not just the interest cost but the annual fixed charges and the lack of control that remove it as an option for us"

Prime Business Consulting have recently launched the Lighthouse Virtual Payment Card as a solution to companies in this difficulty.

 

Disaster Recovery Statistics

According to a recent poll of businesses, man-made disasters affect almost 10% of small businesses, whereas natural disasters have impacted more than 30%. Storms, power failure, flooding, customer loss and other factors led to the closure of many companies.

Analyst firm IDC estimates about 70% of all successful attacks on computer networks were carried out by employees and insiders.

Gartner research suggests that less than 35 percent of small to medium businesses have a comprehensive disaster recovery plan in place.

International Data Corp. estimates that companies lose an average of €60,000 for every hour of computer downtime. According to Strategic Research, the cost of downtime is estimated at close to €65,000 per hour.

According to a recent Touche Ross study, the survival rate for companies without a disaster recovery plan is less than 10%!

Don't become a statistic! Make your plan now and keep it up to date.