The World Cup has been and gone, sadly without Ireland’s involvement, but when it comes to the challenges Irish Small and Medium Enterprises (SMEs) are facing currently, there’s much to be learned from the beautiful game – in particular, not taking your eye off the ball when it matters most.

In the current business climate, that ball is Finance, and bringing in an outsourced Finance Director (FD) is of course a cost-effective way for SMEs to retain critical focus on the financials when times are tough and payroll lean.

But at the same time, it’s important not to overplay Ireland’s economic and business challenges. Current difficulties notwithstanding, Ireland is actually in a much stronger position going into the headwinds than, say, the Brexit-buffeted UK, so we need to keep a sense of perspective on both the depth and duration of the downturn and what action businesses need to take.

Here’s the view from the EFM Ireland bridge.

Pressures now, but help at hand

Let’s be clear: SMEs in Ireland are facing an undeniable cocktail of financial and operational pressures. Like everywhere else in Europe (and most of the wider world), inflation is up, energy prices are up, the cost of living is up, and supply chains are taking a big hit.

Consumer prices were up by 8.9% on the year as of November 2022. Energy prices have risen by 47%, and food by 10.%  Operating costs and the value of take-home pay are getting hit hard.

But at the same time, there are steadying measures in place. In October, the Government made available a €200 million fund (the Ukraine Enterprise Crisis Scheme) to help businesses impacted by the war in Ukraine.

Legislation is also being developed to make an additional €1.2 Billion available in low-cost loans to SMEs and small mid-caps that have up to 500 employees, through the Ukraine Credit Guarantee Scheme.

Conditions are tough, but help is out there.

Growth coming, crisis temporary

But where this gets interesting is when you look at Ireland’s growth prospects.

Europa. eu predicts Ireland’s GDP to grow by 7.9% by the end of 2022, 3.2% in 2023, and 3.1% in 2024, and whilst this spells a slowdown over those periods, it still means over two years’ continuous growth underpinning the economy.

And what this underlying growth indicates is that the current inflation and other woes will be a short-term crisis.

Contrast this with the UK, which is battling the downturn against a backdrop of Brexit costs and falling growth (a contraction of 0.4% is forecast for 2023, for example), and the outlook for the Irish economy and Irish businesses looks distinctly positive.

Focus on Finance – but don’t cut everything

None of this directly answers the question as to what SMEs need to do to make sure they’re taking the right action to weather the storm now but facilitate growth in the future – and it’s here that keeping an expert eye on the Finance ball will pay dividends.

Firstly, in a climate like the present, cost control is critical. How much are you paying suppliers, and could you get the same (or even better) service elsewhere, for the same (or even a lower) price? Where are you overspending, and what can be done about it? What is the overall variance from the cost baseline, and how is that impacting cash flow and reported profits?

Secondly – and closely related to the above – in difficult times, effective cash management can help you build thicker buffers against the unpredictable buyer and market behaviour, so budgeting and cash flow forecasting – three months and longer – becomes imperative.

From a clear view ahead, it becomes easier to predict where cash flow will be weak and put in place measures – more flexible payment methods, shorter invoice deadlines, better credit control and debt resolution, and revised budgets  – to either strengthen it or enable the business to roll with the punches.

Thirdly, identifying the right things to continue to invest in is paramount, In a downturn, it’s all too easy to recast some costs as discretionary, and cut them – when, in fact, you could very well be throwing the baby out with the bathwater. Thinking of cutting IT spending? You could be erasing the business’s ability to perform efficiently with a lower headcount. Contemplating lowering the headcount? You could lose the most productive performers.

Looking to cut marketing spending? Share of voice in a downturn tends to equate to share of voice after it, so it makes sense to continue supporting the public profile now which will help ensure you’re still around in the future.

Where Finance and growth meet

Clearly, as outsourced Finance professionals, we at EFM Ireland can help SMEs with all of the above, and at a much lower cost than employing a full-time, salaried FD.

But what the examples above also show is that being resilient in a downturn is about much more than financial management – it’s about financial management for growth.

At EFM, we’re accredited by Enterprise Ireland as business growth specialists, so whilst we focus closely on the detail, our vision is strategic, and geared to the longer term.

Think of Ireland versus the UK again – same challenges, but stronger growth prospects, so a better outcome. That’s EFM Ireland’s strategy to help SMEs overcome current and future hurdles, in a nutshell.

For more information on how you can use EFM  Ireland’s team of Finance and business management experts on a pay-as-you-go basis to help your business drive growth and deliver successfully in the most challenging economic conditions seen for many years, get in touch today.