Temp workers and sleepless nights - the potential nightmare of cash-flow and back office.
The world of recruitment is sometimes a little bit of a juggling act. Sometimes it feels like that old analogy about a swimming swan. For the client and the candidate, it is all smooth water and calm organisation. The temps turn up to work, they do the job, the client loses the hassle of finding and employing them, and they are happy. For the candidate they know where they are going, they do the work, they put in the paperwork, and they get paid on time.
For the recruitment company, however, it can be a very different story because in the back office they could well be paddling furiously to keep that calm, efficient, exterior running, while at the same time they are facing a range of issues from badly filled paperwork through to client payment delays. Obviously, they can’t allow this to affect the day to day business, so smoothing out the processes and working practices becomes really important to them.
All this has a cost though, and unfortunately, it’s not an easy to see, upfront, clear, cost.
Our experience of recruitment businesses is that they are mostly run by dedicated professionals who care about their clients and candidates. So, because they care, they know that someone’s business team is at one end of the chain and someone’s wage for the week is at the other end of the chain. What can happen is they start to prioritise the paper trail. As a result, the focus goes from where it should be for any business; it gets taken away from generating new business.
That is where the cost comes in. As soon as the need to maintain back office gets in the way of new business you experience cash-flow issues. If there is one thing that any recruitment business owner will tell you keeps them awake at night, it’s cash-flow.
With temp candidates out in the workplace, you are constantly exposed to potential cash-flow issues. Sorry, I wish we had better news for you on that subject, but the truth is that you are. The process of placement and the wages bill can, and regularly does get out of sync with the process of invoice and payment. During the period between the payment of wages to your candidates and the client paying, you are simply out of pocket.
On its own, that shouldn’t really be an issue, though. Again, looking at the recruitment business in a realistic light (actually any business to be truthful) as long as there are invoices to clients waiting to be paid then the situation is only a dip in available cash for a short period of time. That should be a relatively short-term problem unless the worst happens and a client simply does not pay you – but that’s a subject for another article.
Where the problems can really begin is when you start to add the paper trail issue we talked about at the start into the mix. Back office is time-consuming but necessary. However, many recruitment companies simply do not have enough staff, or the experience and training, to handle it without it taking time from other areas. Usually, that means taking it from a front line, business generating, function. As a result, you can easily get into a self-destructive spiral where you have a bad month for cash flow because of the lag between client wage and nvoice payment and then, because of the pressure to maintain back office services, you end up with following month(s) of lower income.
That can lead to severe cash-flow issues, and you are now also showing a downturn in business. That’s when the sleepless nights really start.
There is a solution, though. To avoid the nightmare, just remove the part of the chain that whips it up in the first place. Call us. Here at Outsauce, we have highly trained, experienced, staff waiting to discuss this very problem. Maybe you just need a little help with finance, maybe you need to hand over those costly back office tasks, or maybe you just need a little chat with someone outside the business to fully see where the issues actually are.
Whatever you need, the time taken to make the call will be a better investment for you than a sleepless night of worrying about cash-flow.