Businesses still failing to see value in cashflow management
1 June 2010
Businesses are cutting back on recruiting accounts staff, even though their role in keeping the cash flowing is more vital than ever.
Indeed many of those currently in employment fear for their jobs as businesses rein in their recruitment plans and look to make further savings, even though it could cost them dearly in the long run.
The warning comes from Philip King, Chief Executive of the Institute of Credit Management (ICM) which carried out the survey of its 8,500 Members working across all sectors of the economy.
King believes that when times are tough, and cashflow is under pressure, this is the time to invest in new staff, rather than cut them:
“Our experience over many years shows that businesses who invest in professional credit managers do better than those who don’t,” he says. “But despite this accepted truth, there are still those that do not value their credit department in the way that they should, and see it as a cost rather than a benefit.”
In the figures published today, 16% of credit managers questioned said that their departments had been hit by redundancies, most commonly as a result of restructuring (41%), the loss of business (27%), or downsizing (18%). Jobs being axed ranged from senior financial partners to junior accounts clerks.
Of those businesses that were recruiting, the primary reason was to replace staff that had already left (52%) – a fact that appears to bear out Mr King’s concerns:
“Businesses are not expanding their teams except in a handful of cases,” he says, “and the only recruitment activity we are really seeing is to replace those that have already left – and in some cases left the industry. There is also evidence that businesses are replacing senior credit managers with more junior staff under the false pretext of saving money.”
When questioned as to why companies are not recruiting, nearly a third of Members (31%) said that there was a ‘recruitment freeze’ in place and 14% that there had been budget cuts. Of the firms that were looking to recruit, 60% of jobs being advertised were permanent, 17% temporary, and 23% of businesses were looking for a mixture of both.
Mr King recites one story of a cash-rich business that decided not to temporarily replace a credit manager who left on maternity, in order to save money. Within months the cash had dried up, and they were having to ask the bank for a loan to pay the staff:
“They thought they could get by,” he says, “but when there is no-one there to focus on the job, cash can very quickly dry up and an otherwise healthy business can fail.”
Members were surveyed from within a variety of different sectors, including aerospace, automotive, building and construction, catering, distribution, financial services, leisure, manufacturing, telecommunications and travel.