Recruitment businesses have a unique flow of routine transactions; therefore, it becomes very important to understand the business type before working on the transaction processing in the system. Mainly the revenue and cost flow from temp workers deployed at various hospitals and healthcare trusts.
As a leading accounts receivable outsourcing services provider, we have helped several agencies streamline their AR process. The AR process is a bit tricky in the recruitment sector, considering the volume of transactions. Most of the recruitment companies have either daily or weekly pay/bill cycle resulting into hundreds of transactions for each frequency. The high volumes and complexity can lead to a number of challenges.
Reducing DSOs is the prime objective and one of the biggest challenges for finance leaders in recruitment agencies – cash flow issues always plague this sector and getting paid on time is critical to the success of the business. Some effective methods for reducing the DSOs are:
- Timeliness and accuracy in invoicing: Invoice your clients as soon as possible and make sure that your team sends correct data in the first instance. Also, ensure that the invoices are sent in a previously agreed format, to reduce any chances of non-payment.
- Early payment benefits: Reward on-time and early payments from your clients. This will incentivize them to release the payments on or ahead of time. Ensure that the invoice clearly displays the payment terms and the due dates.
- Easy payment methods: Accounting departments across the UK are beginning to implement automation and digitisation. However, many are still stuck with paper-based processes. Allow your clients to make payments through their preferred mode, including online payments.
Improving the efficiency of the accounts receivable function is another key challenge. Inaccurate invoices, late invoice delivery, missed invoices are all too common. Missing remittances, wrong allocation, split remittances and partly allocated remittances often lead to challenges in cash flow allocation. In order to overcome challenges related to efficiency and productivity, it is essential to get the below points covered:
- Trained and qualified staff: Not only do agencies need to hire experienced accounting professionals and credit control specialists, but you also need people who understand the industry. Accounts receivable and credit control outsourcing companies may also be worth exploring –especially, when it is difficult to find and retain quality resources.
- Credit control process: Many times, agencies tend to be more people-driven than process-driven. Not only does this make your business heavily dependent on individuals, but it also makes it very difficult for a new person to take up a position within the process. Focus on building and implementing a standardised accounts receivable process, and make sure that it is followed by all the teams.
- Technology for automation: Even the best people and processes can achieve only so much with manual processes. Focus on implementing new technology and digitise as many manual or paper-based processes as possible. Not only will this help to improve the speed, accuracy and efficiency, but it will also help generate reports that play a pivotal role in the long-term success of the business.
Reliable accounts receivable and credit control are critical to maintain a good cash flow. To fuel the growth of your agency, make sure that you make this is your strongest link. To discuss this topic in detail, feel free to get in touch with us.