Why do some recruitment agencies struggle financially? Some report a lack of cash flowing into the business, whilst others are constrained by funding caps which restrict their ability to grow at their own pace.
It has been said before but is worth repeating once more – there has never been a better time to be in recruitment than now with three times more agencies in operation today than there were in 2012. It doesn’t take a genius to recognise that with growth comes increased competition between agencies. The REC’s recent report on jobs has highlighted increasing demand for staff and falling candidate availability with the number of people in employment reaching record levels.
So, when the opportunity to take on new clients and assignments presents itself, you would be forgiven for getting all giddy at the prospect of seeing the business take another step closer to achieving its goals. But there is a catch.
Feeding the new business pipeline is essential for any business, but for recruitment agencies, winning new business isn’t the end of the story. Payment terms can often be stretched by clients, making credit limits a major constraint on business growth.
If you are running a good agency business and doing what you do best…sales…then why should you be held back from driving it forward? That is precisely what is happening to so many recruiters; they win a great new contract but the restrictions in place with their existing finance provider means that once the credit limits in place have been reached, they can no longer take on any more business.
Take the following as an example.
You’re a construction recruiter and have been approached to supply 50 contractors to work on a major infrastructure project for six months.
This all sounds great, until you factor that your workers will need to be paid weekly. Although you know that the client is a reliable payer, it could be upwards of two or more months before they pay their invoices. Yet you need cleared funds to be made available every week and because you’ve reached the client’s credit limit, you can no longer access the credit you need to pay your workers. So, what do you do?
You may be able to take on some not all of the workers the client needs. Or you could lose out altogether with the client opting to offer the contract to an agency that can handle the demand.
It is a tricky proposition and the reason why it is important to ensure that your finance provider ‘gets’ the demands placed upon recruitment businesses like yours. They also need to have in place the option to access 100% of the funds you need, when you need them.
No one wants to find themselves in a position where they have to turn great new business opportunities away, especially when you have worked so hard to win them in the first place. It’s about flexibility and having the right finance solution that enables you to react and respond to increases in demand for your services and affords you the option of tapping into the extra funding you need – safe in the knowledge it is insured and debt protected.
Could this solution help you and your recruitment business?