3 reasons why a recruitment agency needs professional credit control services

Credit Control is a strategic and mission-critical finance department function. The overarching role of credit control is to ensure you have enough cash flow to keep your business running. Did you know that 54% of UK SMEs suffer from cash flow problems, which hinders their business growth?

One answer to this problem is better credit control.

What is Credit Control?

Before we get into why it makes sense for recruitment agencies to outsource credit control, it is important to get a better understanding of this term. Credit control is a process that ascertains whether a business your company is giving credit to, will be able to pay you on time.

As can be imagined, poor credit control results in a piling up of bad debts, while good credit control ensures continuous cash flow, which allows your business to pay its creditors on time, offers discounts, pay interest liabilities, and invest in strategic activities that improve business growth.

On the face of it, credit control looks simple enough and is all about optimising cash flow management, but it is a challenging endeavor. It requires a lot of time and effort to chase a customer who hasn’t paid on time. It also involves comprehensive risk assessment that helps your company decide the amount of credit you are either willing or not willing to extend. This requires focussed expertise and a major investment in time and resources. This is why it makes sense to work with a company that offers credit control outsourcing services.

If you are a recruitment agency, effective credit control will be the bulwark of your business as it will determine whether your business succeeds. Let’s take a look at three reasons why an outsourced credit control process makes better sense for your agency:

1) Control Bad Debts

Your recruitment agency will have diverse engagement models. While payment terms and conditions vary from one agency to another, there is no doubt that your client isn’t going to make the complete payment upfront. A major chunk of the payment can only be claimed, once a candidate accepts the job and/or continues a few months into the job. The problem starts when the final demand is raised and the company you have worked for, doesn’t pay up. If it’s just one company, you might not worry about it too much, but what if the list of such companies keeps piling up, which means your bad debts are piling up.

How much time do you want to waste to chase these companies and remind them about their pending payment obligations?

The answer therefore lies in using the credit control services of a company that excels in this domain. The responsibility for maintaining a detailed client list with payment reminder dates and follow-ups rests with this outsourcing company. Credit control professionals will follow-up firmly, albeit politely, for late payment, escalate issues with the finance department and do a whole lot more to ensure your recruitment agency is able to substantially reduce bad debts.

2) Improved Cash Flow Advantage

Reputed credit control companies adhere to industry best practices and use the best credit control software to seamlessly manage the credit control process of your recruitment agency. You neither have to make significant investment in tech installation or employee training or worry about data security. This reduces your overheads and the resultant savings on your bottom line can be invested in other strategic avenues.

Consequently, you have more cash to play with, which naturally gives a competitive edge. You can invest in marketing activities or come up with better business engagement models that offer discounts on long-term agency-client relationships. You can do this, confident in the fact that your agency’s credit control function is in the hands of an expert.

We earlier talked about controlling bad debts, again this results in better cash flow, which in an industry already grappling with low profit margins, is a big plus.

3) Improved Client and Candidate Relationships

As a recruitment agency in the UK, you generally have to pay the candidates on time, even if you are not getting paid by the end clients (this is in case of temporary employees). This puts tremendous pressure on you if you are saddled with cash flow problems and taking up losses. In the worst case scenario, you might be forced to delay payment to the candidate.

This does nothing for the reputation of your agency. In fact, for all intents and purposes, your reputation will take a beating. This is why you must work with a credit control outsourcing company that can optimally manage your cash flow.

Another angle to relationship management is your relationship with clients. Outsourcing your credit control means you are working with a go-between with excellent customer relationship skills. They are experts in following up on payments, in a non-confrontational manner. All this will make for a more meaningful customer experience, that can result in business growth.

Conclusion

Credit control companies in India are a boon to recruitment agencies because they enable you to identify cash flow gaps, help you plan ahead and grow your business. All this without you having to worry whether an invoice will be paid on time or not.

Originally published Mar 11, 2020 10:03:00, updated Jul 23 2024

Topics: Recruitment