Helping the helpers: Debtor finance for recruiters

Hand Shake iStock 000037890200Large

Recruiters frequently have difficulties with cash flow, particularly after quiet periods such as the end of the year. How can debtor finance help?

Recruiters are about to brace themselves for the quiet end-of-year period. As an industry that's always struggled with cash flow problems, these next few months of low recruitment activity could cause some serious financial difficulties. Why does positive cash flow remain so elusive for recruiters, and how can debtor finance help?

The importance of cash flow for recruiters

A recruitment agency is only as good as its recruiters. It's an extremely talent-based industry, one that relies on its employees to have strong connections with a variety of people. Ensuring that employees are paid on time, therefore, is essential to making sure they remain at your agency. Likewise recruiters need to have sufficient working capital to operate - equipment, office space and fees are just some of the things you need money to be regularly available for. Likewise, without working capital, you'll be unable to invest and grow your business.

Cash flow is therefore essential for recruiters. Yet it remains a constant source of woe for many agencies. 

Cash flow difficulties for recruiters

There are several elements of a recruiters' work and clients that create a perfect cocktail when it comes to cash flow problems. Firstly, recruiters have diverse client bases. Often, employers will only engage an agency's services sporadically, meaning it becomes difficult to predict future trends and work out where your cash might come from next.

Secondly, most recruitment agencies have probation agreements with employers. If the employee doesn't pass probation, often the agency that helped find them won't take payment. This means it could be three or even six months before a recruiter issues an invoice, let alone receives their fee. Quiet periods such as that which occurs at the end of the year can therefore lead to serious financial problems.

Finally, while income is fairly unpredictable, outgoings tend to be quite inflexible. Salaries are due at the same time each month, no matter what the recruiters' cash flow situation is.

The solution? Debtor finance

When it comes to unpaid invoices, there is a solution. Debtor finance allows you to take out a loan (of up to 85 per cent) against your outstanding invoices. These can be both existing ones and new ones immediately after they're raised. The loan is then repaid once your clients make their payments.

For recruiters, this is a great option for after those quiet periods. It'll help bridge the gap between the hire and the end of the probation period, and ensure you don't get into any cash flow difficulties later on. Give Classic Funding Group a call today to ask about our tailored funding solutions.