The overtrading paradox

One of the more extraordinary paradoxes of the Irish economy post-crisis is that following the greatest building spree in the Republic’s short history and the ruinous fallout that followed, we now find ourselves saddled with a housing supply crisis.

This must come as a surprise to anyone who frequents the river Shannon and its lakes which have been despoiled by a ribbon of concrete along its course from Killaloe to Carrick-on-Shannon as opportunist builders sought to exploit nature’s natural bounty by pouring concrete on beauty spots for profit. Sadly for all concerned, we are now saddled with a legacy of half built ghost estates. Meanwhile, the housing shortage is causing personal misery and seriously distorting the economy as it begins to attempt to emerge from recession.

The decoupling of the Irish economy with the property market is something dearly to be wished but alas it may take more lessons and even more pain before the Irish property speculation obsession is adequately diminished.

This is to illustrate that economic crises can have unexpected consequences. One such consequence has been a noticeable spike in business distress and failures just as the economy starts to take off again. The cause of this will be a familiar one for those who have been through a couple of business cycles.

Just like the property market, any kind of pickup in the order book can be greeted over-enthusiastically by businesses for so long starved of good news. The understandable reaction is to chase and fulfil any and every piece of business in the market. The wrongheadedness of this approach then quickly becomes apparent in an inevitable cash crisis caused by overtrading.

Engaging in any kind of business requires a minimum level of cash resources and all too often management minds are fixed on sales figures rather than actual cash outlays. The result frequently is at best, embarrassment, at worst, failure.

Working capital management – management of the funds you have ties up in wages and salaries, inventory and work-in-progress and debtors – is something that requires constant vigilance and, If anything, even more so in the good times.

In this regard, the quality of your debtors’ leger is critical. The days sales outstanding (DSO) metric measures the effectiveness of your company’s credit and collections policies. The measure can be applied at a company-wide or individual customer level.

The formula is as follows:

(Accounts Receivable/ Annual Revenue) x Number of days in the year

For example, a company has an accounts receivable balance of€5m with an annual revenue of €30m. Its DSO figure is as follows: (€5 accounts receivable / €30m annual sales) * 365 = 60.8 days
There is no universal, definitive benchmark to determine on the quality of accounts receivable management – it depends on the industry in question. Instead, measurement should focus on the variance with the company’s credit terms. So, for example, a variance of more than, say, 20% above the stated credit terms might indicate a lax credit policy. Conversely, a DSO figure that corresponds closely to the prescribed credit terms indicates that there may be room to relax credit policy.

Of course, prevention is always better than the cure and the most important work in debtor management is done before any new account is approved, because while late payment is a pain, non-payment can be positively fatal.

Something we have noticed recently here in StubbsGazette has been a fresh appetite for Irish business on the part of UK exporters as they pick up the positive noises emanating from across the Irish sea. The likelihood or otherwise of Brexit has resulted in an unusual attention on the sheer volume of business taking place between Ireland and the UK.
Some facts:
•    The UK exported some STG18 billion in goods to Ireland in 2014
•    Ireland is the largest UK export market for food and drink
•    The UK exports more to Ireland than it does to China, India and Brazil combined

Small wonder that we have seen an upsurge in enquiries from UK businesses around our credit reference services as they attempt to form a view from a distance on the credit credentials of prospective customers.
Perhaps more significantly, UK exporters who have recently intensifies their business with Irish customer are reporting difficulties with their collections. In response, we have started a dedicated credit reference and collections service for UK exporters.

Regardless of how geographically close are Ireland and the UK, small but significant legal and cultural differences can make debt collection significantly more difficult. In response, we are offering UK exporters a bespoke and systematic collections service. Already the service is beraring fruit as the following testimonials signify:

Lauren Cowen, Wolverine Worldwide - “We use StubbsGazette Automated Collections for late payers in Ireland. It produces excellent results. We would have no problem recommending them to other companies doing business in Ireland.”

Annette O'Neill, Wexford County Council - "The dedicated resources of Stubbs to the debt management process provides us with a mechanism of a timely and sustained follow up process..."

Ber O'Brien, Cork County Council - "Stubbs were excellent to deal with...we had access to our database for our contract 24/7 to see any on-going payments, comments from conversations with customers, etc.. We would have no hesitation in highly recommending them...."

If you have any queries about our services simply fill in the form below and we will get back to you very soon.

Top Judgments Registered


Szymon Bondyra
Address: Peachville Lodge, Kilshane, Dublin 11
Amount: €133,495.86


Elite Performance Strength & Weight Loss Limited
Address: R/o 27 Cook Street, Cork
Amount: €118,049.12


MPK Bars Limited
Address: R/o 76 Western Business Parkway, Block 5, Ballymount, Dublin 12 D12 R156
Amount: €94,733.41


Declan Cullen
Address: 13 Urrin Valley, Enniscorthy, Co Wexford
Amount: €89,006.35

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