Three top tips for managing your cash flow as a recruitment business

Recruitment is a fast-moving industry, where the pace of growth is often risked by one fundamental factor: cash flow.

Any recruiter wants to focus on getting deals over the line, the lifeblood of their business and the thing that gets them out of bed in the morning. But, however successful you are at placing candidates and meeting client needs, the problem of cash flow doesn’t go away – indeed it risks undermining all the good work elsewhere.

It’s a particularly pressing problem given the speed at which companies in the industry have to work, incurring costs to meet immediate client needs, then waiting much longer for bills to be paid. This is especially prevalent in temp recruitment, where contractors are usually paid on a weekly or monthly basis, but agencies are mostly on 30-60 day payment plans. For many agencies, the gap between paying bills and having your own paid can become a business critical problem.

At Growth Street, we work with many recruiters who are looking for a finance solution that will let them focus on what they do best, without having to worry about being tripped up by inconsistent cash flow. Here are our three top tips for managing this:

1. Find a finance solution that’s light on admin

In recruitment, time is money, and you can’t afford to be spending too much on administration. So focus on a finance solution that works for you, giving you peace of mind without costing too much precious time.

For some this will be a business overdraft from their bank, well-known as a simple and flexible source of finance. However, banks are often reluctant to grant access to them, while they can come with high penalty fees, too.

Invoice finance is another popular option, allowing companies to borrow against or sell on their unpaid invoices. But the extensive amount of paperwork that the weekly reconciliations can require may begin to feel like more effort than it’s worth.

Alternatively, there’s the product we offer here at Growth Street: GrowthLine. This is an overdraft-style solution that provides a flexible line of credit, calculated against your assets (stock, invoices and WIP). You can then draw down and repay as much or as little as suits you, as often as you like. GrowthLine is there to support companies as they grow, so the limit can expand as your business does. It’s been designed to address exactly the problem many recruiters face – to fill the gap between doing work and getting paid in a way that’s transparent, flexible and above all easy to use.

2. Get an accountant

The people that say you have to spend money to make money? They’re not wrong. As a small agency who won’t have an in-house finance professional, it’s worth giving serious consideration to hiring a third-party accountant. This obviously comes with a cost, but there’s also a good chance that by having your books well organised, your cashflow carefully monitored, and more time to spend on revenue-raising activity, that you will end up saving – or making – more than you spend.

3. Manage invoices carefully

It sounds obvious, but there are some basic things any recruitment company can do to maximise their chances of getting invoices paid on time. Firstly, be absolutely sure you’re sending your invoice to the right contact at your client’s business, so you can be sure it’s hitting the right inbox and not getting lost in the depths of the finance department. Secondly, ensure that your invoices are straightforwardly presented, clearly indicating the amount due, payment methods and your details. Always email rather than post, and it’s usually worth following up to ensure that the invoice has been received and is being processed.

In other words, short of paying the invoice yourself, do everything you can to ensure you get paid as quickly as possible. Small details can make a big difference.

To find out how a GrowthLine could help your recruitment business, visit growthstreet.co.uk or call 0808 123 1231.

Written on in Business Insights Borrowing