Top Tips for Effective Credit Control
It can be challenging for recruitment agencies to get paid on time by their clients. In fact, the nature of business often results in agencies working on large projects for extended periods of time without being able to bill, which causes real difficulties for cash flow and can even threaten the financial well-being of the business.
Here are some top tips for effectively managing credit control within your business to minimize outstanding debts and to maximize your working capital.
Manage Invoices Effectively
When an invoice becomes due, raise it quickly and make sure it is accurate, checking for common discrepancy areas such as the company name to invoice and the PO number in advance. Mistakes can make you look amateurish and also give the client an excuse to hold up the payment.
Prioritize Credit Control
Make sure that you stay fully on top of the business cash flow. If your bank account suddenly runs out of available cash, your business could really be in trouble. Make this a priority above your clients and candidates. A controversial statement perhaps in the age of customer-centric business models, but a necessary one nonetheless.
Get the Right Services in Place
Recruitment factoring can be a useful service to mitigate cash flow risks. It works by effectively providing a short term cash loan to advance what you are owed in invoices, due within the next month. It is often used to cover the payroll when cash flow is tight.
Make Sure You Get Agreements in Writing
A handshake and a conversation may encourage quick business, but you are only safe if you get your agreements in writing. Make sure the exact terms are explicitly stated for each recruitment role you are being contracted to fill, and also note down any agreed amendments. Also get into the habit of writing notes as you speak on the phone, and circulating afterwards for reference.
Develop Clear Ts and Cs
Make sure you have a clear policy that lays out your terms of payments and any conditions of payment. Be transparent about your fee calculations, and where the onus is on the client to communicate any affecting changes to you, such as a variation to the salary of a role you are working to fill. Make sure you go through these terms with any new clients and ensure that all contracts and agreements are signed and dated. Ideally, have these processes checked by an experienced auditor, or measure them against an accreditation process such as the ISO quality management system.
Request a Deposit
A good move for any recruitment business is to request either an upfront part payment, or a deposit for a new job commission. If any part of it is potentially subject to refund, make sure the terms of this are explicitly laid out in writing. By building this into your process you will get a sense of how reliable and serious a new client is.
Also see if your regular clients would be willing to set up a monthly retained agreement for your service, to access greater benefits such as a preferential rate, quicker access to staff and a higher service level agreement for example.