Increasing costs and regulations, and debt warehousing changes: Many Irish businesses are feeling the pressure in 2024.

What is the outlook for Irish organisations this year – is there hope on the horizon and what can be done to weather the storm? Paul O’Donovan shares some insights.

While prominent hospitality closures dominate the news, many Irish SMEs are currently facing a challenging start to the year. Recent changes and issues in Ireland includes minimum wage hikes, VAT changes, regulation changes, inflation, and supply chain issues.

No matter what industry, now is the time to check if your 2024 budget is holding up.

Irish businesses now need to review if their 2024 budgets are working, especially with regards to cash flow management.

Most businesses would have set their 2024 budgets in October and a lot has changed. So  is the time to review Q1 numbers against those budgets and make adjustments accordingly, so they have a clear picture of where they’re at now.

I suggest then businesses would certainly need to be doing – at a minimum – bi-monthly management accounts, if not monthly management accounts, to compare what they’ve budgeted with what’s actually happening.

Effectively, if there are issues, this means they’re pinpointing it as early as possible and that that they’re getting the right advice implemented as fast as possible.

Keep on top of how increased costs and inflation measures will affect you.

Payroll is one stressor: the minimum wage has increased wage costs by 12%; new sick days have been added; pension changes are coming midyear; and additionally Enhanced Reporting Requirements have created administrative headaches for many businesses.

Inflationary measures, and gas and electricity measures, may well bring prices down – but they’re not coming into effect until March. The various wars are hitting pricing on the shelves: food and ingredients have increased once again in 2024.

There’s a lot of wind blowing around increasing overheads. Businesses need to ascertain what their pricing structure is, what their capacity is, and how they see their business going in the next three to four months.

Debt warehousing: recent changes “a breakthrough for SME survival” but smoothing Q1 and Q2 cash flow is crucial.

On Feb 5th, the Minister announced very significant changes to the Tax Debt Warehousing Scheme.

“Both I and the Revenue recognise that cashflow is challenging for many of these businesses, and we want to do all we can to support viable businesses.

The changes being confirmed today include:
📌 The interest on the warehoused tax is being reduced to 0% (any business that paid interest already on warehoused tax will have it repaid)
📌 The Revenue will adopt enhanced flexibilities including extending the repayment term beyond the standard 3-5 years on a case-by-case basis
📌 The Revenue will work with individual businesses who encounter cashflow difficulties and will show as much flexibility as possible.”

These announcements are a breakthrough for SME survival but businesses need to be in negotiation with Revenue now to understand what payment structures they can achieve. This ensures a smoother ride with regard to cash flow and budgeting, versus Revenue putting them under pressure.

Businesses that put their head in the sand could find that they’re not able to meet their current liabilities because of their debt warehouse liability. That in turn causes their debt warehouse liability to arrangement to be ceased, and they then get called on the full payment immediately.

There’s a bit of a chicken and egg scenario – payments have to be kept up-to-date in order to avail of whatever arrangement with Revenue regarding the payment of the arrears.

What can businesses expect from the second half of 2024?

Announcements of popular restaurant closures certainly send shivers down everyone’s spine, but for businesses who can stay on top of Q1 and Q2, 2024 has plenty of potential.

When it comes to growth, there are favorable interest rates and loan options, such as SBCI.  However, housing shortages remain the biggest threat to staffing and growth, with more sustainable development urgently needed.

In addition, we recommend that businesses think green for growth in more ways than one. One of the conditions that the banks are looking at is how sustainable companies are into the future and what they’re doing from a green point of view.

Businesses should be exploring green options, like solar and reducing emissions, given their growing importance to funding criteria. If business thinks they will be looking for loans or expanding, they need to ask themselves if they meet that criteria in three, four, five, seven years, or even 15 years. Sustainability plans will be key to long-term viability and meeting future requirements from banks and investors alike.

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• Payroll 2024 changes for Ireland 
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