Irish businesses need to get on top of their bills, not defer them

SMEs face another challenging year amid rising costs, cash flow worries and an uncertain political landscape, but there are opportunities for sustained growth

Warehoused tax debt, a wide range of rising costs and an uncertain domestic and international political landscape mean that 2024 is set to be yet another challenging year for SMEs.

Put simply, if a business can manage to weather these initial trials and keep their cash flow healthy in the coming months, they will be in a much better position to take advantage of the predicted inflation downturn in the second half of the year and grow their business.

To act upon these potential opportunities later in the year, it is critical that businesses are armed with a thorough understanding of the current economic landscape. By staying informed, proactive and adaptable, SMEs can transform challenges into stepping stones for sustained growth in 2024.

There are three key areas that SMEs really need to keep an eagle eye on as the year progresses.


1. Debt Warehousing – SMEs need to get on top of their bills, not defer them

Yes – it’s good news that Minister for Finance Michael McGrath has announced that the Government will reduce the interest rate attached to warehoused tax debt to zero per cent and will refund businesses who made repayments at the original interest rate of 3 per cent. However, the fact remains that there is currently €1.72 billion owed by 57,000 businesses that must be repaid before May 1st, 2024.

With the latest PwC Insolvency Barometer predicting more than 1,000 insolvencies in 2024 and particular strain being felt in the retail, hospitality and construction sectors, there is much concern among insolvency experts that many businesses will not be able to afford the repayment.

What the Minister needs to remember is that time is actually the enemy for these businesses when it comes to repaying debt and that flexibilities around personalised phased payment arrangements (PPAs) is actually just kicking the can down the road for them. SMEs need to get on top of their bills, not defer them.

Revenue Commissioner Ruth Kennedy put it more starkly when she encouraged businesses to engage with Revenue if they are facing financial difficulties. “In the absence of meaningful and timely engagement with Revenue, Revenue will proceed with appropriate collection and enforcement action to recover the debt,” she warned.

As a result, these Irish SMEs need to take practical steps now to maximise the health of their cash flow so they are in a position to repay their warehoused debt or deal with any other challenges that could present themselves in the coming months. If they don’t, insolvency could loom.

2. Cost challenges will continue, but 2024 will also offer opportunities for sustained growth

As we move through the year, many businesses may find themselves at a crossroads between increased costs and the cash flow required to grow and develop their operations. New measures such as the pension auto-enrolment scheme and a recently increased minimum wage level will apply even more pressure to businesses that are already struggling with high inflation, interest and energy costs.

These new expenses will add another layer of complexity to business operations, so it will be essential they take the time to recalibrate their financial strategies to accommodate these changes while ensuring the sustainability of their operations.

That said, the predicted respite from inflation rates in the second half of the year should provide a boost to various sectors, particularly the property and construction market. If the cost of construction materials begins to fall, we definitely foresee opportunities for expansion and development in this sector. An inflation drop may also lead to more favourable conditions for businesses seeking to invest in property.

And if a business needs extra cash flow to facilitate any challenges or opportunities during the year, such as R&D, mergers and acquisitions, expansion or equipment purchase, they should make sure to cast the net wider than mainstream funders for the supports required, particularly if they don’t want to take on extra unwanted debt.

More sustainable solutions such as invoice finance allows businesses access to money outstanding from their unpaid invoices, helping them to access income they have already earned but not yet received – meaning you don’t have to borrow any money.

3. An election year – how will national and international election outcomes impact on Irish SMEs?

The Irish political landscape will be dominated by the polls this year, with all sectors bracing themselves for the outcome of local, national and European elections. Decisions made at local and European level can impact on everything from licensing and planning regulations to infrastructure development, so the elections in June have the potential to directly influence the operation of SMEs. The results will also provide an indication of public sentiment when it comes to the next general election, so everyone will be paying very close attention to the outcome.

The next UK election, due to be held no later than January 2025, coupled with the US presidential election on November 5th, will have significant influence on the global economy. Ever-shifting global politics present the potential to create turbulence in the import/export landscape, with changes in tariffs, trade agreements and diplomatic relations directly impacting on the cost and accessibility of goods and services.

As a result, there is much speculation about how potential shifts in taxation, regulatory frameworks and incentives might translate into policies that could directly impact on SMEs’ operations.

So, while SMEs need to be prepared for an unpredictable 2024, there are definitely reasons for optimism in the current economic climate. A combination of careful financial planning, staying informed on the political landscape, developing a mindset of adaptability and resilience, as well as engaging in a proactive approach to addressing challenges as they arise, will help SMEs across the country lay the foundations for long-term success.

Mark O’Rourke is managing director of Bibby Financial Services