Half of SMEs say business customers taking longer to pay since pandemic began

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Report from Bibby Financial Services Ireland found SMEs are planning to invest on average €114,000 over next year



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2 November 2021

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Research from Bibby Financial Services Ireland has found that 87% of SMEs are planning to invest in their business over the next 12 months, with an average spend of €114,338 planned per business.

The top three areas of investment identified as: staff training and development (39%); digital technology and IT (39%) and recruitment of new staff (34%).

It also found that most businesses (84%) are either confident or very confident about their business prospects for the remainder of the year and into 2022, with 54% identifying new customers as a top area for growth. Meanwhile, 35% of businesses say they do not believe a return to pre-pandemic levels will recover until after Q1 2022. This sentiment is felt strongest among transport and wholesale businesses who believe that demand will not return until at least August 2022.

Despite growing optimism, key fiscal and operational challenges remain for Irish SMEs. Indeed 29% say suppliers have gone into administration, liquidation, or receivership, rising to 43% for those in the construction section and 41% for wholesalers. Other key challenges include increasing business costs (32%), overcoming Covid-19 safety protocols (29%) and renegotiating new rates with customers and suppliers (28%).

Further demonstrating the supply chain impact of the pandemic, more than one in ten (12%) s have withheld payments to suppliers, with those in the transport sector (19%) most likely to have held back these payments. While subsequent impact on the flow of payments between Irish businesses is expected, its effects are likely to be long-standing.

Other key findings include:

  • Nearly half of SMEs (45%) say it is taking longer for business customers to pay since the pandemic began
  • On average, payment has been delayed by almost five weeks for those experiencing extended payment times (4.98)
  • Bad debt, owing to the inability to pay or protracted default of debtors, is an issue for a proportion of SMEs, with nearly one third writing-off sums owed (30%), with an average of €28,164 lost per business
  • The wholesale sector has been disproportionately impacted by payment issues, with 47% of those businesses suffering from bad debt, and the average delay in receiving payments for the sector is 6.33 weeks

As a result, managing cashflow and accessing working capital is a key consideration for SMEs moving forward, with almost a quarter of SMEs (22%) say they now need cashflow support more than ever before. In addition, the Bibby Financial Services Ireland report found that 38% of Irish SME will require additional funding into 2022 as they look beyond the pandemic and return to growth.

Such funding will be vital in ensure businesses can deal with inflation, overcome supply chain disruptions, ramp up recruitment to fulfil demand, and invest. As a result, considering solutions from the private sector that protect against bad debt and offer access to working capital will provide SMEs with certainty of payment and sustainable sources of liquidity.

The pandemic has also offered businesses an opportunity to reflect, with some entrepreneurs and business owners deciding it’s time to restructure, refocus, innovate, and grow, while others have come to the conclusion that it’s time to exit their business totally. Over a third businesses (36%) say they are considering merger and acquisitions opportunities in the coming months, while one in ten (9%) SME owners are considering a management buy-in, rising to 19% for wholesale and 33% for transportation businesses. When it comes to funding transactions, SMEs owners consider private equity, business loans and invoice finance as the top three ways to finance merger or acquisition activity.

Mark O’Rourke, managing director of Bibby Financial Services Ireland, says that although times have certainly been more testing than ever before, he believes Irish SMEs are now on the cusp of a strong recovery as we look towards 2022.

“SMEs generally are showing significant resilience after such a turbulent few month and are remaining positive despite the challenges that still lie ahead. Our new report shows there is genuine light at the end of the tunnel both for businesses and the economy. The time has come to begin to move forward with confidence.

“However, as businesses recover and get back on their feet, its concerning that a third say their greatest challenge is rising business costs, while almost a quarter say they need cash flow support more than ever before. As a result, the private and public sectors need to remain focused on providing any required financial support to enable SMEs to do what they do best – drive employment, boost output, and fulfil consumer demand.

“This help comes in many forms, be it through the provision of funding to unlock cashflow, supporting businesses in overcoming the complexities of trading overseas in a post-Brexit world or helping SMEs to understand changing customer behaviours and transitioning to digital operating models. The research ultimately shows that a diverse range of financial tools including invoice finance will help companies grow and prosper into 2022.”



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