Leadership

Creditor days double in Irish businesses

18.02.2009
Businesses in the Republic of Ireland have doubled the time they take pay invoices over the last two years according to new research from Creditsafe, the business and credit information firm.

With the credit crunch clearly impacting upon the payment capability of Irish businesses, the average number of creditor days, those taken to clear invoices, has effectively doubled from 9.76 in 2006 to 18.98 in 2008. Such a trend clearly has major implications for business cash flow and could see a knock on effect of delayed payments for suppliers and employee wage payments.

This represents a dangerous threat to the liquidity of creditor businesses in Ireland, already facing far tougher conditions with bank lending greatly restricted.
“The impact of the financial crisis is clearly being felt across businesses in all sectors, with companies holding onto money in an effort to maintain their own liquidity," said Billy Spence, Managing Director, Creditsafe Ireland.

“The worry is that this increasing trend of late payment could cause the failure of those businesses that rely on constant cashflow. With access to credit from banks increasingly restricted, a greater number of businesses will be relying on efficient payment from those they trade with and any exacerbation of this trend could see many companies going under."

“The nature of the problem is such that late payment from one company inevitably damages the liquidity of the next, making prompt payment from them to their suppliers less likely," continued Spence. "Finance and credit controllers need to ensure they're employing the most effective methods for debt collection as it's ultimately their bottom line that is at risk."

For advice on cashflow and debtor management, see our Owner Manager Guide to Working Capital Management