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Recruiters: How Can You Manage Cash Flow Effectively?

Recruiters: How Can You Manage Cash Flow Effectively?

At the leading edge of digital innovation and transformation, successful recruitment companies typically secure high value clients and use extremely effective techniques to get new business customers. But how adept are recruiters at managing their working capital to ensure the day-to-day running of their valuable businesses?

HR Aspects Magazine spoke with James Sinclair, from Trade Finance Global, who specialise in recruitment finance.


Why Do Recruiters Struggle with Cash Flow?


“Recruitment companies frequently face a perfect storm when it comes to cash flow, struggling with raising the money to sustain their workforce and run their business”

James Sinclair, Trade Finance Global


James explains, “There are several key reasons for this:

  • pay-on-success fees are common in recruitment. Often recruitment firms cannot get paid until they have sourced employees who must then complete their probation period;
  • when recruitment firms begin their employee search, larger clients may not be paying an initial retainer fee upfront;
  • late payments are typical, with larger clients paying on at least 30 day terms, and some are paying recruiters as late as 90 days; and
  • recruiters get high value but low volume work – sometimes making most of their annual revenue from a small handful of large deals; with more niche-focused, boutique recruitment firms charging high fees when serving specific sectors. This means they rely on closing a few, big deals each year, which results in an irregular cash flow.”


How Can Invoice Finance Help?

“Invoice finance offers asset-based finance solutions to businesses trading with other businesses on credit,” continues James.

“Using invoice factoring and discounting as cash flow management tools, invoice finance sells a portion of a recruitment firm’s unpaid invoices to a financier. In exchange, the recruitment firm receives up 95% of the invoice’s total value as an immediate payment.”

“This eases the pressure on cash flow and means the recruiter can then:

  • be more flexible with employee payment options, including base salaries and bonuses;
  • take on more clients and grow the business without having to wait for payments to come in to fund this;
  • use invoice discount facilities with the full confidence that clients will not need to know these external finance arrangements; and
  • outsource their finance team to the factoring company, leaving the recruiter free to focus on running and growing their business.”


To discover more about the financial options that can benefit your business, please read Trade Finance Global’s guides, below: