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The recruitment industry: Cashflow and Factoring

The recruitment industry in the UK is a multi-billion pound industry. Lots of owner managers of recruitment companies are great sales people and fantastic entrepreneurs but not always as focused on finance

Running a recruitment agency is very difficult and the demands on cashflow are enormous. According to “The UK Insolvency Helpline Debt Advice Service Business Rescue Team”, a common reason for employment agencies to go into liquidation or administration is the cash flow difficulties in paying temporary employees.Cashflow is most demanding for temp or temporary recruitment firms

  • Temps expect to be paid daily, weekly or monthly. If they don’t get paid then this will cause problems from both the temp worker and the client.
  • The competition is huge from established multi branch high street agencies that have enormous cash reserves.
  • Most business in the temp recruitment sector rely on overdrafts and cash flow cab very tight.
  • For recruitment agency to enjoy financial success it is important for it to have an efficient payment system running up and running.

Factoring in the recruitment sector

  • Many factoring businesses overtrade because their sale force often bring in deals that sound fantastic, such as a contract for 20 temps but the reality is that these temp need to be paid.
  • Owners of recruitment firms have the choice to either share a large contract with another agency or consider using factoring to finance expansion.
  • The worst scenario for a temp recruitment company is that its clients go insolvent leaving them to pay the temp or contract workers. That is why there must be enough cash in the business to cover client failures.
  • Temp agencies should consider credit insurance as well as factoring.
  • Cash is king in the recruitment sector.
  • Temp agency bosses must realise quickly that the core business is about finding and placing people and that they should outsource as much as possible….starting with the payment, invoicing and cashflow management side of the business.
  • Cashflow is a problem for start-up and growing recruitment companies. Factoring can solve this problem
  • If a recruitment agency uses factoring it will not need to worry about being able to pay workers.
  • A factoring company can offer a recruitment business the value added services of a complete back office.

Whether it is for permanent staff, temporary PAYE workers or self employed contractors the factoringhelpline.co.uk can find flexible and attractive cashflow solutions.

Get an invoice finance quote today by calling 0800 597 4757 or apply online to compare factoring companies.