Cashflow management is one of the biggest problems facing Irish businesses today. A company may well be able to monitor its profit and loss results on a month-to-month basis but regardless of profit forecasts, no business can expect to continue to trade if it is not in control of its cashflow.


To pinpoint the exact problem when it comes to cashflow is difficult – after all, no two companies are the same. However, at DCA Accountants and Business Advisors, we have seen a trend developing where credit control is one function in a lot of companies that falls down – the knock-on effect of course is that day-to-day cashflow management generally falls with it.


There are macro issues at play of course – a shortage of credit in the economy being the primary difficulty. People, it seems, are less willing to give out credit terms these days, the result being that credit is much tighter than before. Therefore, third party contractors are less willing to carry out a job in full before receiving payment. This situation damages the economy as a whole from the point of view there is less and less work being initiated. Without having the cash in place, it therefore becomes irrelevant whether or not a company has the ability to generate profits further down the line.


There are solutions, however, but it is imperative that directors, managers and business owners alike are aware of the discipline it takes to improve a cashflow situation.


The first step most companies must take is to try to work their credit terms more efficiently – this is what we call ‘The Matching Concept’. In other words, businesses need to match the level of credit that they obtain from their suppliers with the level of credit that they supply to their customers.


I would also strongly recommend that companies appoint a credit controller – someone who is responsible for and dedicated to managing the business’s debtor’s ledger book on a daily basis. By having this system in place, a company can have someone who can answer queries, can input daily updates to the debtor’s ledger, and can stay consistent when it comes to following up outstanding payments, which is very often left on the long finger by business owners themselves.


One of the core functions of the team at DCA Accountants and Business Advisors is to drive home the importance of cashflow management and the effects it can have on the future of our clients’ businesses. In most cases, we prepare cashflow projections for the month ahead and try to help our clients anticipate when and where they will have difficulties in this area. After all, if they are armed with the information, they have the ability to do something about it before it negatively impacts on their company.


We can also manage the debtor’s ledger on behalf of our clients. By appointing a dedicated member of our staff, our clients avoid the expense of having to employ a full-time credit controller, as well as knowing that their outstanding accounts are being followed up and managed on a daily basis, which allows them to concentrate on their core business and of course, to generate more sales.


Whatever your situation when it comes to cashflow management, it’s always wise to remember that if this most important aspect of your business is not managed correctly every day, you are, whether you realise it or not, putting your business in serious jeopardy.


Declan Dolan,


DCA Accountants and Business Advisors