How to tackle bad debt risk in the recruitment sector: A proven strategy
Are you a Finance Director in a recruitment firm who has seen debtor days rising? Are you concerned that the risk of bad debt might be heading in the wrong direction? It’s not surprising or unusual in the current economic climate as many businesses are operating with cashflow issues and disruption stemming from the pandemic, Brexit, as well as the war in some cases too. So it is entirely possible that a proportion of your customers are struggling. If the risk of bad debt is concerning you and your senior management team, read on for a solution.
It is often the case that embracing new ways of doing things can bring additional benefits for business. During the pandemic, many firms were forced to do things differently simply to stay in business. The entire business community, across every sector, stepped up to deal with disruption. Now the challenges facing recruitment firms and their customers have changed. Many have returned to offices and workplaces and are looking forwards to a more settled business future – but most agree that this reflects a ‘new normal’ rather than a return to how things were before.
According the OECD at the close of 2021: “the UK economy was expected to reach pre-crisis levels at the beginning of 2022. Output was projected to have risen by 6.9% in 2021, with growth moderating to 4.7% in 2022 and 2.1% in 2023. Consumption is the main driver of growth during the projection period. Business investment will improve but continues to be held back by uncertainty. Increased border costs following the exit from the EU Single Market are weighing on imports and exports.”
Although it appears that a more stable economic landscape is ahead, the effects of the last few difficult years have not subsided completely. Some of your customers’ businesses will have been hit much harder than others; some will be continuing to deal with changed business circumstances which will have dented their business resilience and impacted their cashflow. For sectors such as agriculture and logistics where Brexit has also caused major issues, the changes these customers are dealing with will continue for some time until reliable and robust new ways of working are established.
What does this mean for recruitment firms?
Having acknowledged that some change is here to stay, it is now time to put your business on a firmer footing in order to tackle the next set of challenges. It is wise to look at what internal changes can be made to better equip your business and your people for the road ahead.
1. Get your teams working smarter not harder
Most firms will have spent the last few years pushing to maintain a level of productivity and turnover whilst also dealing with ongoing disruption. Your team has already been working hard – so if you want to achieve more, then now is the time to invest in tools that will help them to work smarter. For the Finance team, that means providing a Finance system that better supports how they need to work, automates some obvious tasks, substantially reduces the administrative burden, eradicates error-prone rekeying, and removes the reliance on stand-alone spreadsheets. And that’s just the beginning. For your consultants and support staff, a customer relationship solution which removes the over-reliance on paper records, enables timely sharing of information, supports collaborative working practices, enhances customer relationship building and ensures everyone is working from one accurate version of the truth.
2. The right tools and technology are needed to tackle the challenges ahead
There is little point in ignoring the fact that a lot of businesses (recruitment firms and otherwise) continue to struggle. So your staff need to have the right tools in place to be able to deal with the business reality they face on a day-to-day basis. As well as the current shortage of workers coupled with a vast number of vacancies, one of the biggest issues recruitment firms are facing is getting paid on time. If your Finance system sits in a silo, away from the wider business, and is reliant on high levels of manual intervention to identify and act on problems – then your ability to address late payers and cashflow issues is limited.
With up-to-date software such as Access Financials, it is easy to keep track of payments, see in good time when customers are falling behind or not adhering to their usual payment terms, and set up automated activities to ensure no account is left without intervention. But that’s not all. Access Financials includes valuable third party credit risk data to enhance your decision-making. The Business Health Dashboard, powered by Experian, gives your business the opportunity to see a much clearer picture of the financial health and payment behaviour of your customers and prospects. Not only can you then tailor your terms to ensure your cashflow forecasts stay in line with income, your team can also ensure that more financially stable customers are actively targeted.
Many recruitment firms are now seeing the benefits of a joined-up solution that combines Access Financials with our market-leading Recruitment CRM software. Presented via one single platform and tailored to individual user needs across your business, this combined solution ensures that all of your staff have a full and accurate picture of who to target, which customers might require intervention, and where your business is likely to make the most profitable deals.
The unique addition of credit risk Experian data via the Business Health Dashboard means that your sales consultants are forewarned of which customers might present payment delays, either for permanent or temporary placements. Obviously these will have different levels of risk, however what it does allow for are more reasonable and achievable payment terms for both parties to be agreed up front.
Investment in the right technology shows commitment to business success and your staff
One final point to note is that making changes internally, upgrading the technology your staff have to work with, and investing in your business demonstrates your positive business outlook and the value your leadership team places in the people it employs. Our sector is seeing the green shoots of recovery – so why not maximise the opportunities ahead and invest in your business future?
