Even the most successful businesses can run short of cash from time to time. Sales may be buoyant, but wages and salaries and other bills have to be paid before the invoices are even sent. The question for business owners is: what to do before the cash runs out?
“A profitable business can run short of cash simply because profit is booked when a sale is made, while cash arrives only when the customer pays,” explains Elaine Comer, deals advisory, corporate finance, PwC Ireland. “That gap can be significant. A seasonal hospitality operator may have quieter winter months, an agri-food producer may hold stock for weeks before sale, a construction firm may be waiting on stage payments. Meanwhile, wages, suppliers, Revenue payment deadlines and loan repayments continue regardless, creating a temporary but real squeeze on working capital.”
Aoife McGinley, head of client services with Bibby Financial Services, agrees: “Strong order books do not always translate into strong cash flow.”
Indeed, recent research conducted by Bibby Financial Services shows that just over one in five SMEs (22 per cent) cite cash-flow constraints as a material issue, rising to 25 per cent among firms with turnover between €1 million and €5 million. More than a quarter (27 per cent) say they do not have the cash flow needed to grow, while 46 per cent report increased funding requirements.
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“Another clear trend currently is the lengthening of payment cycles,” McGinley notes. “Across a range of sectors, businesses are waiting longer to get paid, tying up cash within the balance sheet for longer periods. In some cases, businesses are accepting longer credit terms to win or retain customers, only to find that actual payment times stretch further again. So, while a contract may stipulate 30 days for payment, we are seeing this now moving towards 45 or even 60 days, with businesses that supply larger multinational organisations dealing with even longer terms.”
This trend is reflected in the Bibby research, with 69 per cent of SMEs reporting a deterioration in invoice payment times, up from 62 per cent in Q4 2025. Late payment issues are most pronounced in construction at 73 per cent and wholesale at 72 per cent.
“SMEs are now owed an average of €82,960 in unpaid invoices, compared with €72,276 in the previous wave,” McGinley says. “One client recently described their business as becoming ‘a victim of its own success’, with strong sales growth creating larger debtor balances and increased working capital requirements. While the business remained profitable and demand continued to grow, some key customers were taking 70, 80, 90 or even 100 days to pay. It is a powerful reminder that profit and cash are not the same thing.”
Working capital is therefore not only about managing risk or paying day-to-day bills, she adds. “It is what gives a business the capacity to accept new orders, invest, expand and capitalise on growth opportunities. Regular cash flow forecasting can help businesses identify when funding will be required and plan for it before pressure emerges.”
There are ways to address the issue, with most businesses bridging working capital gaps with an overdraft, term loan or invoice discounting, according to Comer. “An overdraft suits a short, uncertain gap because funds can be drawn as needed; a term loan suits a defined amount and repayment period; invoice discounting unlocks cash tied up in unpaid invoices and grows with sales,” she explains. “With Ireland’s concentrated banking market, non-bank lenders now provide a valuable alternative. Compare total cost, security, flexibility and repayment terms, not just the headline rate.”
The objective should not simply be to close an immediate cash gap, McGinley advises. “It should be to put a funding structure in place that supports day-to-day trading, maintains financial flexibility and enables the business to act when new opportunities arise.”
This is where invoice finance can provide a solution. “Invoice finance is a financing facility that offers businesses access to money outstanding from their unpaid invoices, helping them to access income they have already earned but not yet received,” says McGinley. “For many B2B businesses, unpaid invoices represent one of the largest assets on the balance sheet, yet that value often remains inaccessible while they wait 30, 60 or even 90 days to be paid.
“So, rather than waiting to get paid, invoice finance allows businesses to access a significant proportion of the value of approved invoices immediately, helping to bridge the gap between delivering work and getting paid. So, for example, if you have €300,000 or €3,000,000 currently owed by customers, Invoice Finance can provide access to up to 90 per cent of the value of approved invoices within 24 hours of the invoice being raised. The remaining balance will then be paid to you, minus an agreed fee, when the customer has paid their bill.”
For many businesses, the decision on which financing option to choose boils down to cost, but there is no single cheapest option, according to Comer. “It depends on how long funding is needed and how reliably it can be repaid,” she explains. “A term loan gives predictable repayments for a defined need; an overdraft is flexible but costly when heavily drawn. Invoice discounting carries interest and service fees, but funding scales with sales. A retailer building stock ahead of peak season may prefer short-term flexibility, while a firm with large upfront costs and delayed receipts may suit invoice discounting. The right choice turns on total cost and how each facility fits your cash cycle.”
Cost shouldn’t be the only consideration, of course. “The better question is whether the facility matches the purpose, timing and pattern of the business’s funding need,” says McGinley. “The most effective working capital solutions are those aligned with how the business actually trades and which provide sufficient flexibility to support both current operations and future growth.”
