"And Cash is Reality" - especially now

You will probably be familiar with the business mantra ‘Turnover is Vanity, Profit is Sanity’. It is certainly true but I always feel this misses one final but vital stanza which should read, ‘And Cash is Reality’.

Many businesses fail each year, not because they are mismanaged; although what follows would tend to suggest they are dumb for not managing their cash, they simply run out of money. With the economy in a vulnerable state, as it is now, I would recommend that every recruitment business focuses a significant amount of effort on making sure its cash collection process is robust and credit control is working properly.

This is not just advice for the back office staff but an essential consideration for the whole client facing team. Make sure you watch for signs that clients may be having problems of their own. Watch out if you see clients starting to chop and change suppliers more than usual; it often signifies that they are spreading the load and not wanting to have too many single supplier large debts accruing. Watch out for debtor days (the period they take to pay you) starting to extend – when money supply is short businesses always use the cheapest cash available and that come from their creditors.

I am confident that the economy is strong enough to stave off any major threat but do worry that ill prepared businesses will become victims. Don’t become one of them.

Gareth