8 Key Metrics Every Recruitment Agency Must Monitor

For recruitment agencies, data is an invaluable resource. It can be used to monitor business performance, boost productivity, and track financial health. Here are eight key metrics that your recruitment agency should track.

1) Debtor Days or Days Sales Outstanding (DSO): One of the most critical functions for any business, and especially for companies in the recruitment sector, is credit control. This key finance function helps determine business success. So, how can your recruitment agency check if it’s running an effective credit control function?

This metric determines the average time taken for a client to pay an invoice. Doing a comparison of this data with your payment terms will help you understand which clients you need to chase regularly to make sure that the payments are received on time.

2) Invoice Aging: This refers to how long an unpaid invoice remains in the system. You can utilise this data to identify actionable items and follow ups, as well as to determine which clients are reliable and valuable for your agency. Through customer aggregation, you can evaluate the overall efficiency of your collections. This data can also lead to enhanced visibility into the health of your business.

3) Asset to Debt Ratio: This is the ratio of total assets to total debt. It gives you can indication of your agency’s financial leverage. The asset to debt ratio can be used to measure the growth of an agency through its acquired assets over time. A result greater than 1 indicates that your agency is in an excellent position.

4) Gross Margin (GM) & Gross Profit (GP): GP is the amount of profit that a business earns, while GM is the percentage of total billable revenue constituting profits. These two figures will give you an accurate picture of how much money your agency is making. Some other key findings you can obtain from this data include profitability of each business line, difference in margins depending on candidate source, and average profit per interview for a specific team or segment.

5) Margins and Placement Fees: For any recruitment agency, temporary margins or permanent placement fees are a consistent revenue stream. You can gauge business performance by measuring and tracking your average temporary margin or placement fee for growth or erosion. Furthermore, this metric can assist with revenue projections.

6) Time to Hire: This is the amount of time it takes to shortlist, interview, and hire a new employee from the moment they apply until the time they are onboarded. This data can help with forecasting and recruitment strategy. When you have a clear indication of how long it takes to recruit the right individual, your agency will be better placed to achieve targets, deduce bottlenecks, eliminate problems, and reduce time to hire.

7) Cost Per Hire: This metric will ascertain the average amount of money spent onboarding and hiring a new candidate. Some examples of hiring costs include advertising, recruiter fees, interviewing time, referral bonuses, administrative costs, and background checks among others. This data will be helpful for future planning and budgeting. It also helps determine cost-efficiency of the recruitment process.

8) Annual Turnover Rate: This refers to the rate at which candidates leave your pool for a variety of reasons. A high turnover rate can become costly for your recruitment agency. By reducing attrition or turnover rates through effective training, employee engagement activities, transparent communication, and reward & recognition programmes, recruitment agencies can save significant costs in the long run.

Conclusion

By tracking these key metrics, your recruitment agency can gain insights into its processes, understand which aspects require finetuning, and come up with better processes to enhance business efficiency in the long run.

Do you want to transform your recruitment accounting and pay & bill functions? At QX, we add value to our clients’ F&A process using the right mix of people, process and technology. Speak with our experts for personalised advice on how to transform your finance & accounting function.

Originally published Sep 28, 2021 08:09:38, updated Apr 16 2024

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