Cash flow is the oxygen of a business. In the UAE’s high-opportunity, high-expectation market, many companies look profitable on paper yet suffocate because cash isn’t moving at the right time. This post breaks down what really chokes cash flow in the company, why healthy liquidity matters more than “profit”, and the playbook to fix it—fast.
What’s Really Happening in the Market (with UAE data)
- Half of B2B sales are on credit and terms average ~47–50 days. More than 58% of UAE invoices are paid late, and bad debts are rising—putting day-to-day liquidity under stress. The most common reason for delays? Administrative holdups in the customer’s payment process (not always insolvency).
- Corporate Tax now matters to cash plans. UAE Corporate Tax (generally 9% above AED 375,000) applies for financial years starting on/after 1 June 2023. Returns and payments are due within 9 months of year-end—so cash needs provisioning well before the deadline.
- VAT timing can bite. Output VAT (5%) is due when the time of supply” occurs—even if the customer hasn’t paid yet. If a debt remains unpaid for 6+ months, the supplier may claim bad-debt relief—and the customer who recovered input VAT must reverse it. This can trigger cash adjustments on both sides.
- Cheques aren’t dead; the rules changed. Penal consequences on many bounced-cheque cases were reduced in recent reforms, but civil recovery became faster (cheque as an “execution deed” in specific cases). In practice, this raises the stakes for issuers and improves recovery prospects for payees—both cash-flow relevant.
The UAE Cash-Flow Problem Tree
- Slow receivables (long DSO) Sector norms of 45–60+ day terms; late approvals, PO mismatches, and complex vendor portals add weeks.
- High fixed outflows Licenses, leases, visas, utilities, WPS payroll—predictable but inflexible.
- Compliance timing Quarterly VAT and 9-month CT payments create lump-sum outflows if you don’t accrue monthly.
- Instrument risk Post-dated cheques and supplier credit remain common; policy shifts change the risk/cost of delay.
- Seasonality & cyclicality Ramadan/Eid, tourism swings, big-project milestone payments: cash arrives in lumps, expenses don’t.
- Funding friction Banks are selective with SME working-capital lines; many firms turn to supplier credit or invoice financing.
Why “Profit” ≠ “Liquidity”
- Profit is accrual; cash is timing. A single late AED 1M payment can force you to delay salaries, miss early-payment discounts, or breach covenants—despite a “profitable” P&L.
- Cash has compounding effects. Tight cash triggers supplier holds, which delay projects, which delay receivables—a vicious loop.
- Regulatory clocks don’t pause. VAT/CT deadlines hit whether your customer paid or not