A recent survey by the Institute of Certified Public Accountants in Ireland (CPA) highlighted the real and immediate impact that the lack of liquidity is having on business in Ireland. Small and medium enterprises are struggling and in many cases viable businesses are being sacrificed due to the inability of businesses to secure working capital. Good cash management is vital to avoid undermining a business's short-term stability and its long-term survival.

Starting in Limerick on February 9th, the Institute of Certified Public Accountants in Ireland (CPA) is running a series of seminars offering practical guidance on the various aspects of effective cash management. Topics covered include working capital, retention of title, debt enforcement, credit control and corporate rescue.

CPA President John White said; “The most basic problem at the moment is a lack of cash. Banks are not lending and this especially affects firms that rely on borrowing as a source of finance. As businesses fight to hold their own in tough trading conditions, they are pulling in their expansion plans. Unpaid suppliers are going to court to recover their dues and ask for possible closure of businesses.’

‘Right now cash is oxygen to a business. Without the ability to meet the day-to-day demands from its suppliers for payment, a business may well find itself cut off from its essential inputs and face serious cash flow issues. For any business essential cost items such as trade goods, raw materials, employees and services such as light and heat all need to be covered to keep the business going. Keeping a tight rein on cash flow is important at the best of times. When the economy slows and the insolvency risk rises, it becomes absolutely essential.’

White calls for business owners accustomed to dealing with their accountants to leverage this relationship to plan through this difficult period.

“Management should be consulting with their financial adviser on a regular basis in order to gain a full understanding of the business’ cash flow”, says White. “Assets need to be evaluated, liabilities assessed and all income and expenditure items should be critiqued line by line. Businesses need to focus activities in those areas where they are competitive and ensure that they ‘sweat the assets’ to the maximum extent possible. Similarly, effective debt enforcement, credit control policies, clever purchasing and cash flow forecasting are all mechanisms that will help to keep a tight rein on expenditure.”

The Institute of Certified Public Accountants CPA gives companies some top tips to managing cash flow. These include:

• Shop around for better credit
• Switch suppliers
• Reduce overtime
• Invest in technology to achieve efficiencies
• Introduce cost control procedures
• Review and scale back of non-essential activities
• Improve debtor management
• Increase overdraft facility
• Examine invoice discounting option
• Change purchasing and stock arrangements
• Review internal policies such as expenses and travel policy

White concludes, “Despite some talk of ‘green shoots’, the outlook is bleak and commentators tell us that business will have to plan for at least two years’ of difficult, challenging times. But those who take the appropriate actions now and manage their cash well will emerge from the current downturn in a much stronger position.” 

Starting in Limerick on February 9th,  the series will also run in Cork, Killarney, Galway and Dublin. Check out the links for further details.