The recession was bad for the recruitment industry, we all know this. (Truth be told it was bad for everyone, but that goes without saying). However post-recession, the UK is experiencing a boom in employment which means that the recruitment industry now generates more than £35 billion a year. But as any recruiter knows, in a world of rebates and time to place, getting your hands on actual cold, hard cash is no easy feat. In fact, cash flow is one of the biggest concerns for recruitment agencies across the country, and if you happen to be pay-rolling a few hundred contractors, it becomes an even greater issue. So how do you get your hands on cash, and more importantly, keep the money rolling in?
Sort out your payment terms
We know you want to be friendly and build great relationships with your clients and asking for money is always awkward, but write short payment terms into your contracts and stick to them rigidly. Gone are the days of 30 or 60 days payment terms. Set them for fifteen days or less, and communicate to your clients that they’re non-negotiable. Clients will always pay late, so if you give them 30 days to pay in the first place, the chances are they’ll take 60. Running an agency means you need to get as much cash through the door as quickly as possible and short terms will help you do this.
Use your CRM
Of course, your recruitment software is to help you find candidates, but it also exists to make every aspect of your life easier. Which is exactly why we built Access Recruitment CRM to specifically integrate front and back-office functions. That means it should link your front and back office, allowing the technology to send automated reminders with payment links to your clients. It saves your consultants having to chase up, or your accounts team, which keeps the relationship healthy and money talk free.
If your payment terms aren’t giving you the money you need quick enough, and your automated reminders aren’t giving your clients the nudge they need, invoice factoring will help you bridge the shortage in cash flow. The service allows your recruitment agency to outsource outstanding invoices to a third-party funder. You get an immediate injection of cash shortening the time between raising an invoice and collecting payment, and the funder will then collect from your clients. This is one of the most cost effective and quick solutions to get cash in the business.
That doesn’t mean you need to lower your invoices or anything drastic like that, but you can offer preferential rates to clients based on payment being received within terms. Those rates don’t have to be drastically lower, but marginal gains will help you here. The incentive will hopefully get your clients to chase their own accounting teams quickly to ensure their recruitment costs stay down. It’s a win-win situation for everyone.
Slap a fine on it
No one likes a fine, but once candidates have been placed you need those invoices paid, and late payment fees can often get businesses to pay up surprisingly quickly. Remember, in recruitment you’ve already spent months of unpaid time doing the work, so by the time you’ve placed a candidate and sent the invoice out, it’s been a couple of months already. Those invoices are already overdue.
No one wants to chase money, but cash is always king and your ability to set the right processes to get that cash can often be the starting successes of new recruitment agencies.
Hear from our CRM specialist on why Access Recruitment CRM software can place more candidates quicker.