Cash flow Advice for Your Recruitment Business

June 04, 2019

Cash Flow Advice Recruitment-01

The recruitment industry is expected to expand over the next five years, following the latest industry reports discussing the predicted fall in national unemployment rates. With growth in the labor force expected to boost recruitment demand, the need for healthy cash flow is paramount for growing recruiters.

Growth will naturally result in increased financial demands, with more pressure on cash flow. To take advantage of new opportunities and win new contracts, you will need a plan in place to ensure there is steady cash flow available to support a jump up in costs, especially payroll.

We’ve put together our top three quick tips on managing cash flow to help make sure you’re well set up for business growth.

Put Together a Cash flow Forecast

Knowing the timing of expected cash inflows and outflows is critical to planning for how much cash will be needed. You can work with your accountant or use free templates available such as from the Business Victoria website here. When getting started, here are some things to keep in mind:

  1. Be as honest as possible with your forecasts and review regularly - this could be monthly or even weekly, depending on how quickly your business is changing.
  2. Measure your accuracy. See how your projections compare to the actual numbers you achieve. This is a great way to see whether your projections are accurate, and if you need to adjust them in future.
  3. If possible, look to automate the reporting process by implementing accounting software that can automatically input your cash-flow forecast values, like Quickbooks, Xero or MYOB.

Manage Larger Clients or Customers

Big clients can sometimes seem like a double-edged sword. On the one hand, their business can provide credibility and large contracts for revenue growth, but payment terms can be slow. Managing larger clients requires a constant balance between building and investing in a long term relationship and negotiating contract terms that are favourable to you.

GET funding where necessary

All businesses struggle with cash flow at some stage, but recruitment more than most; in fact, the recruitment and labour hire industry faces a unique challenge when it comes to managing cash flow. Not only is there a high labour cost but there is a large disparity between customer payments and outgoing costs. On average the wait is 42 days to be paid AFTER payroll is due – this is a huge cash flow gap. If customers don’t pay on time this gap can be even longer. Invoice finance can be a great option and if you want to know more about it, you can find a detailed blog of how it works and why it’s a good option here.

Alternatively, if you’ve been invited to join a customer’s supplier finance program (or early payments program), this is also a great option for getting the most from your cash flow. Bear in mind that your customer will need to have set up the program and invited you to join, but if they have, there are a whole lot of reasons for you to take up the offer.

Following these three simple recommendations is a sure-fire way to get ahead during this expected industry growth. Contact one of the friendly team members at Timelio today to ensure you are well-prepared and fully funded for the exciting chapter that lies ahead in the recruitment industry.