Credit control is a critical aspect of any business, but it can be particularly challenging for recruitment agencies. Unlike other businesses, recruitment agencies rely on steady cash flow in order to maintain their operations and fulfil their commitments.
Late payments can cause serious financial problems for an agency, so it's important to have a robust credit control process in place.
In this blog post, we will outline six tips that should help you improve your credit control process and overcome the problem of late payments.
Why cash flow is critical to recruitment agencies
Recruitment agencies are often seen as a high-risk investment, due to the volatility of their industry. Unreliable customers can lead to cash flow problems for an agency, which can, in turn, impact its ability to pay suppliers and employees on time.
In order to minimise this risk, recruitment agencies need to have a strong credit control process in place.
A part of this is because recruitment agencies are responsible for paying any temporary staff on their books as soon as the placement is made. This means that agencies need to have a credit control process in place so they can ensure they are paid on time by their clients - and don't end up out of pocket themselves.
Additionally, recruitment agencies rarely get paid upfront for their services, with most of the payment coming through once the temp worker has been placed for a few months. However, the temp staff need to be paid upfront, meaning that credit control is essential to make sure that the recruitment agency isn't left out of pocket.
Because of the need to have a consistent stable of customers, recruitment agencies often offer favourable payment terms to their customers, resulting in them potentially waiting for 30, 60, or even 90-days before payment it made.
All these factors add together to mean that credit control for recruitment agencies is a vital part of their business.
So, what can be done?
Well, here are six credit control tips for recruitment agencies that can help.
6 effective credit control tips for recruitment agencies
1. Optimise your credit control policy
An effective credit control policy is the foundation of any credit control strategy.
Take the time to review and amend your credit control policy as needed, making sure that it is up-to-date, compliant with current legislation, and reflects your company’s credit philosophy.
Your credit control policy should also be tailored to your specific industry sector. For example, recruitment agencies may need to allow for a longer credit period than, say, a manufacturing company.
When drafting your credit control policy, be sure to consider the following:
- Credit limits and credit approval process
- Payment terms and invoice due dates
- Late payment charges
- Collections procedures
- Reporting and management information requirements
- Staff credit control responsibilities and training
Once you’ve developed your credit policy, make sure that it is communicated to all members of staff. It should also be made available on request to credit insurers or prospective business partners, such as clients and suppliers.
If you're still struggling with starting your credit control policy, you can use Chaser’s credit control policy template to get started.
2. Send your terms and conditions with every CV
Communicating your terms and conditions with your customers is hugely important to establishing a relationship based on credit control best practices.
Your terms and conditions should be sent out with every CV so that your customers are aware of when they have to pay. This helps set the tone for the credit relationship and avoids any confusion later down the line if you do end up chasing late payments.
In addition, it’s also a good idea to include your credit control policy in a contract with your customer, so that they understand the credit relationship from day one.
3. Confirm all verbal conversations!
Never be happy with just a verbal confirmation of credit terms from your client. If a credit controller hears ‘I’ll get that to you in the next couple of days’, they should follow up immediately with an email or letter confirming what was discussed and when payment is expected.
This helps avoid any confusion later on if the customer doesn’t make their payment on time and credit controllers have to chase them.
By confirming payment terms in writing, credit controllers can ensure their client is aware of their credit profiles on the company’s credit report from day one and that they understand the consequences if they fail to make payments on time.
If clients don’t pay up by an agreed date, you should be ready to escalate the credit control process by starting with a friendly reminder, perhaps via email or phone.
If this doesn’t work and you’re still left chasing late payments, credit controllers can request an on-site meeting with their client to discuss the bill in person. These meetings are often effective as credit controllers can negotiate a more realistic payment date and discuss their credit history in person.
4. Send the invoice right away
As soon as the candidate’s start date has been confirmed, credit controllers should send their invoice to the client.
The credit controller should make sure that they have all of their client's contact information, including email addresses and postal addresses so that they can ensure invoices are delivered as quickly as possible.
Along with a written request for payment credit controllers may want to consider sending clients an invoice reminder.
Many recruitment agencies offer generous credit terms to their clients as this can help them win business. However, these credit terms can also lead to late payments.
Recruitment credit controllers should consider using credit control software to help them manage credit limits and send invoice reminders so that they can be sure of receiving payment on time without damaging the client relationship.
5. Send payment reminders
Prompt payment reminders are a credit controller's best friend.
If you have credit control software, like Chaser, set up to automatically send invoice reminders, this will save your credit controllers valuable time and effort and help improve cash flow in recruitment businesses.
Chaser's invoice reminder templates can be easily customised by credit controllers so that these late payment emails contain information specific to the client at hand.
If you don't have credit control software, your credit controllers will need to manually send payment reminders to clients on a regular basis. The downside to this is that it takes time and effort, which costs money.
By using automation, you are able to save credit controllers' time by making a credit control task that would have previously taken days, into one that takes minutes. Chaser will automatically send payment reminders on your behalf so credit controllers can focus their attention elsewhere.
6. Give your clients multiple payment options
The best way to get paid is by giving your clients multiple payment options. This could be anything from credit and debit cards to PayPal, bank transfers or even cheques.
If you can offer your clients a range of payment methods, it will make it easier for them to pay you on time. Plus, it reduces the chances of them being late with their payments.
Chaser's Payment Portals allow credit controllers to send a list of payment options directly to their clients, so they can pay in the way that suits them best. The Payment Portal also brings together all of the outstanding invoices, so clients can see all their unpaid invoices in one place.
Payment Portals makes it easy for credit controllers to send out a list of payment options directly to their clients, who can then pay in the way that suits them best.
Effective credit control for your recruitment agency
Many recruitment agencies have found that credit control is a major pain point in their business. Late payments can cause cash flow problems, which can damage your agency's reputation and grow the risk of you having to pay late payment fees yourself.
By using the six tips we've listed above, credit control should be much less of a hassle for your recruitment business. Yes, credit control can take time and effort, but it's essential if you want to avoid late payments - which could cause serious cash flow issues in the long run.
