Financial control and cash key to recruiters getting through coronavirus crisis

Strong financial controls will be the key to recruiters surviving the coronavirus outbreak, according to a recruitment industry analyst and long-time observer of the industry.

Sue Dodd, director of Agile Intelligence who compiles Recruiter’s annual HOT 100, told Recruiter that while demand for temporary staff in areas such nursing, health and social care will be strong, “there are so many other recruiters that are going to see their business grind to a halt, so the companies that can survive it are those that have strong balance sheets and also very strong financial controls”.

She said she recalls the advice given by Hays’ group finance director Paul Venables during the financial crisis of 2008-09 that it was measures and processes, such as keeping debtor days in good order and other tight financial controls and KPIs that saved money and saved companies. 

Dodd said that the effects of the coronavirus had the potential to be worse than the 2008-09 financial crisis when there was a 25-30% drop off in sales revenue. However, she said precisely how bad things got depended on how the government acted. “If things go the same way as they have done in Italy, then in terms of recruitment, for several months it is going to be worse than it was in 2009.”

Graham Palfery-Smith, industry veteran, chairman of 6Cats International and adviser to several companies in the sector, told Recruiter that while there were opportunities for recruiters in sectors such as pharma and medical, and particularly in the contract market, “for the rest of us it is a question of battening down the hatches wherever possible”. 

Palfery-Smith agreed that recruiters needed to focus on cash. “Cash is the lifeblood of our industry and obviously that’s what survival will be about for everybody. It will be about retaining sufficient cashflow. So the first thing that I think every business and I’m pretty sure certainly all the ones that I’ve spoken to will be focusing on is the cash.

“What have we got, how long will it last. What can we trim? What’s unnecessary? What have we committed to and not committed to and those sorts of things. It’s those things good businesses should be looking at anyway, and now more than ever.

“The good news for recruiters is they generally have significant reserves in their businesses, whether it’s in their own receivables or on their balance sheet in another form, because it is a cash-generative business.”

Dodd said that while it was inevitable that some of the UK’s 24,000 recruitment businesses will not survive, “having to stop or substantially reduce their businesses for the next three or four months or possibly even longer”, based on what had happened in previous recession and downturns “recruitment being recruitment” the industry will inevitably regenerate itself and revive. 

In addition to the inevitable start-ups, Dodd said that in previous crises it was often small and medium-sized companies rather than the big companies who led the revival: “The former companies were nimbler and were able to respond faster coming out of the crisis.” In contrast, Dodd said it was often the big companies that tended to do fairly sweeping cuts, so they struggled to get that momentum to come out of it. 

“I’m not saying all small and medium-sized companies will survive. Far from it. But I do think that if they have held on to their staff, probably they will be the first to start recording growth again – just based on what we’ve seen in the past.”

Meanwhile, following government advice given by the government, Reed Specialist Recruitment said that it had closed its office in Camberwell Green in London “as a precautionary measure due to the possibility of an employee was exposed to COVID-19”.

A spokesperson for Reed Specialist Recruitment told Recruiter: “All Reed Specialist Recruitment employees have been issued with clear guidance from Public Health England and the government in terms of what the symptoms of Covid-19 are and what to do in the event of displaying symptoms.”

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