The UK recruitment industry has had much to contend with in recent times. Like many organisations, recruitment agencies have been forced to react to new legislation introduced by a new, more cost-conscious government, with cuts in public sector expenditure and rises in VAT and National Insurance contributing to what is an already precarious economy.
And, as if that wasn’t enough, many of the fundamentals of recruitment have undergone something of a sea change, with a large number of businesses opting to advertise vacancies on their own websites and through social media channels instead of engaging the services of recruitment agencies.
Yet despite these challenges, 70 per cent of recruitment businesses reported an increase in turnover in the six months to the end of October last year*. A number of agencies have even opted to cast their nets wider in a bid to beat the recession, entering new markets and taking on additional staff as a result of expansion.
This has presented recruiters with new headaches, such as lack of access to working capital. Agencies often find themselves having to manage stopgaps between paying staff and candidates’ wages and receiving payments from clients. It’s unsurprising perhaps that a growing number are looking to cash flow solutions such as invoice finance as a means of covering operational costs.
The following tips from recruitment finance specialists Bibby Financial Services are designed to help ease some of the cash flow pressures placed on recruitment agencies:
Do your homework
It’s essential that recruitment agencies – irrespective of size and standing – do their homework on all prospective clients. Failure to conduct a credit check or research payment history records could present significant problems further down the line.
Stay in touch
Always keep up-to-date information on clients. Not even a business that enjoys a glowing reputation or one which has traded with you for years is exempt from the threats posed by the downturn.
Effective management
Ensure invoices are accurate and dispatched to the right person, at the right place, at the right time and state clearly the date on which payment is due. Moreover, agree a set time of the month to issue invoices and stick to it. This will greatly improve the likelihood of your agency being paid on time.
Play the field
Smaller agencies can be reliant on a small number of clients. Consider the implications on your agency’s cash flow if one or more of these clients experiences their own financial complications, or worse, ceases to trade. A more extensive client base across different sectors can help spread the risk.
Get yourself protected
Consider using bad debt protection to minimise the fallout of one – or a number – of your clients going out of business.
Time waits for no man
Ensure temporary workers are clear about how and when timesheets need to be submitted. Delays in timesheets being submitted severely reduces the chances of both the worker and your agency being paid on time. Make it clear that chasing timesheets is a time consuming process which has an impact on profitability and the rates you can pay.
Cash is king
Agencies seeking funds should consider specialist alternatives to traditional bank lending, such as Recruitment Finance. This can help plug the gap in an agency’s cash flow by providing an immediate injection of funds against the value of outstanding invoices. The availability of working capital could make all the difference during these challenging times.
Know your rights
You are in business to make money so don’t be embarrassed about discussing it. Be polite yet firm and do not hesitate to consider legal advice if the problem of late or non-payment persists.
Leave it to the experts
Consider outsourcing back office functions such as payroll and credit control. This will not only ensure your agency’s finances are in the best possible hands, but also enable you to spend less time chasing outstanding payment, producing payslips and calculating National Insurance and PAYE and more time chasing new business.
Staying on top
Review your agency’s finances and resources on a regular basis. This will enable managers to make decisions regarding efficiency and business strategy both more swiftly and confidently.
Bibby Financial Services’ Recruitment Finance package is available to independent recruitment agencies from start-up to more established agencies. It includes:
- invoicing, funding, collections and payroll solutions tailored to fit the specific need of the agency
- up to 100 per cent funding against outstanding invoices
- one simple fee – transparent pricing
- no minimum fee
- a comprehensive payroll facility for both agency staff and temporary staff placed by the agency
- access to an online agency management tool which enable agencies to track client and candidate performance
- comprehensive credit control run by our dedicated and experienced team
In 2010 Bibby Financial Services provided funding of £100 million to a variety of small and medium-sized organisations.
