One of the problems that every business faces is cash flow. When a company prepares its budget and forecast for the coming year it needs to estimate turnover for that coming year and the cost of achieving those sales. Even a company with large assets can fail if it is unable to ensure that its cash flow meets its commitments.
When it comes to cost there are many fixed liabilities such as rent, tax and insurance that will be due on specific dates. Assumptions have to made about cash flow in general however. Income should be received based upon the standard trading terms and bills paid likewise. Everything can be therefore put into forecasts to plot how the bank balance should look at any point in time. As the year progresses the position can be reviewed based on the actual performance.
When it comes to the recruitment business there is an inherent cash flow problem. That is the time lapse between the date that the agency pays its workers and the date that clients pay their invoices. While it is possible to factor that into the prepared forecast it is a far from ideal situation. The answer for you if you are running an agency and want to improve your cash flow may well be recruitment finance that can reduce the period between your paying the workers and receiving your money.
There are specialist service companies such as http://www.cashsimply.co.uk/improved-cash-flow/ in the recruitment sector that offer factoring services. The principle involves their paying you your invoice revenue as soon as you raise the invoice. It is not a matter of then having to wait thirty days or more for payment. Indeed you will get the added benefit of not having to chase slow payers. There is a cost involved, but the service company will pay you and collect the money from clients.
There should also be insurance available so that you will not be asked to return any money against business failure of your clients. The benefits certainly outweigh any disadvantages in using this service. There will be a cost but you will be receiving your money at least four weeks earlier and sometimes twice that length of time even from prompt paying clients. Imagine if you pay a weekly worker at the end of week one, but the invoice is monthly, you will have paid weeks one to four before the invoice is raised and payment comes a further four weeks later.
By using a service that makes sure all your regular commitments will be paid you will have the time to grow your business and increase your profits. You will have the peace of mind to know that everything is being taken care of. Rather than spending your time chasing money owed you will be able to chase more clients, make more calls and network with new businesses. As you win more business more of your time will be needed to interview and source new candidates. Your new clients will need to have a proper working relationship with you and your team. New processes will have to be established to account for your increased productivity and you will need to carefully plan out the future of your business.
The priority for every business as the positive signs of growth continue is expansion. Recruitment companies need to concentrate their efforts on increasing turnover and any time spent on non productive issues like credit control is wasted. It is surely far better to use a reliable specialist?
Image attributed to Freedigitalphotos.net Stuart Miles