Late Invoice Payments Harming Irish Firms

Better late than never. That adage might be true in certain scenarios, but not when it comes to small-to-medium-sized enterprises (SMEs) in Ireland making invoice payments. Research shows that not only are the majority of invoice payments late, but also that late or unpaid bills have forced businesses in Ireland to lay employees off.

Timely invoice payments are crucial to any business. Without it, companies could have a difficult time proving that they are reliable and responsible. Recent research about companies based in Ireland shows that the Emerald Isle might need to find better payment methods.

According to a survey conducted by Sage Ireland, a business software group, 59 percent of businesses said invoices paid by check were late. Additionally, of those late payments 21 percent were more than one month overdue.

The Irish Times cited data from the report, which said that while 54 percent of surveyed businesses use bank records to track cash flow, only 44 percent use a management solution to centralize information.

Sage Ireland Commercial Manager Simon Bell told the news source that cash flow is essential to the success in businesses, particularly SMEs.

“There are a number of measures that can be taken to alleviate the effects of late payments and ease the worry of cash flow issues. It is vital that businesses keep on the front foot with payments and understand the full extent of their outgoings,” Bell said.

The news source explained that Ireland has one of the lowest users of e-payments is Europe. Specifically, the nation has 133 e-Payments per capita per annum, while the EU average is 273. However, the goal of the National Payments Plan from the Central Bank is to lower the use of cash and checks in transactions and double the level of e-payments in Ireland by next year.

Unpaid Bills Leads To Fewer Employees

But, what exactly happens if a company makes late payments? Is it a three strike warning system? According to credit management group Intrum Justitia, the repercussions are usually far more serious.

Intrum Justitia surveyed 10,000 European businesses and found that the level of bills or invoices that are late or unpaid increased from €350bn to €360bn between 2012 and 2013.

In Ireland alone, the level of bad debt in that time increased from 0.2 percent to 3.7 percent of all businesses’ total annual revenue, totaling a combined loss of €6.2bn.

According to Chair AJ Noonan, the top two priorities for Irish SMEs are the supply of finance and finding more customers. However, commercial banks need to step up and begin building better relationships with those firms, he told the Irish Independent.

“Irish SMEs rely heavily on banks as a source of external finance – 93.2 percent of the €27.6bn SME finance market – which makes them vulnerable to developments in the banking sector,” Noonan said. “Therefore it is essential that the Government works to deliver a greater diversity of funding such as direct government funding, peer-to-peer lending platforms, business angels and venture capital.”

The research also showed that nearly half of business managers in Ireland – 47 percent – said that one of the consequences of late payments was having to let employees go. In comparison, 26 percent of business managers in Europe said that a potential result of late or unpaid invoices was employees being fired.

Intrum Justitia CEO Lars Wollungsaid in a company statement that the possibility of employees being let go is why businesses’ credit management is key.

“Imagine if European companies had those 360 billion euros they now need to write off on a yearly basis, to invest in their businesses,” Wollung said. “If all bills also were paid on time that would add further jobs to our economy.”


Featured PYMNTS Study: 

With eyes on lowering costs to improving cash flow, 85 percent of U.S. firms plan to make real-time payments integral to their operations within three years. However, some firms still feel technical barriers stand in the way. In the January 2020 Making Real-Time Payments A Reality Study, PYMNTS surveyed more than 500 financial executives to examine what it will take to channel RTP interest into real-world adoption. Here’s what we learned.

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