According to Sonovate’s latest piece of research, UK recruitment agencies have, in the last ten years, missed out on £6 billion in outstanding invoices. Sonovate are a leading contract finance provider. In their latest piece of research, based on data from Companies House, they discovered that UK recruitment agencies approximately miss out on £314,991 in outstanding invoices each year. The picture was even bleaker for established companies that have been operating for more than ten years, as they are missing out on £600,000, on average. Start-up agencies are also affected, with those founded after 2012 being owed in excess of £100,000. Richard Prime, CEO of Sonovate, comments: “Cashflow is vital for the survival of small businesses, and as these figures demonstrate, it is stopped by neglectful clients exceeding their agreed repayment times. In contract recruitment the repayment window typically sits between 28 and 45 days, but in reality payment materialises between 45 and 60 days, if not longer.” According to our latest benchmarking report, 23% of agencies we surveyed encountered regular or occasional problems with cash flow.
Our Top 3 Solutions
Manage Debtors Actively
Make a detailed spreadsheet of “aging” debtors to identify the clients who owe money and the length of time they have been a debtor. Do not hesitate to follow up on overdue accounts thereafter, beginning with the largest amounts due. Consider asking if there is anything you can do to help the client pay – for example, allow them to settle their bill in instalments.
Reward Early Payers
You can reward customers who pay early. Consider offering a discount of 5% or 10% to customers that pay in a short period of time, designated by you, or to a customer who pays cash. It can also be good practice to introduce new initiatives, such as asking customers to pay a percentage up front (or ideally, pay 100% of the bill up front).
In 2014 Xero reported that UK SMEs who use online accountancy programs are getting paid 23 days quicker than they did in 2011, which is significantly improving cash flow. If cash flow remains a problem for your business you may also consider factoring, which can dramatically help your business through funding the shortfall between meeting wage commitments and receiving money from your customers / clients.