Top 3 Ways to Optimise Your Recruitment Business Profit

Are you looking for tips to augment your income and increase your recruitment business profit? Do you feel your business’ income is high enough yet stagnant and unprogressive? Well, it could be because you have followed every conventional method in the book but not yet tried any novel ideas to make your business grow. Having your own website, a regularly updated blog, marketing your services to target businesses are certainly important to acquire new clients. However, it’s the inventive ideas that could add value to your business operations and bring in more money.

There are some people that hopped on the recruitment bandwagon with a hope to grow their venture into a successful recruitment firm. Some of them made it, some of them didn’t. It’s the way they set their priorities that separated them. Today in this article, we are going to give you some great pointers on how to increase the profitability of your recruitment business and have it aiming for the stars.

Get Someone to Guide You

Recruitment agencies involve a lot of people on all sides. In order to sustain and grow in an industry that deals primarily with so many people, it is necessary that you have both solid knowledge and experience in the industry and also that you consider taking on the services of a non-executive director.

An ideal non-executive director is someone who is able to advise on both operational and strategic aspects of your recruitment business. Since the methods of job hunting are ever evolving, a tech-savvy person, possibly with some financial acumen would be a well-suited runner for the position. It goes without saying that having a non-executive director onboard would be another fee you have to pay. However, it is the returns they can bring your business that matter in the end.

Before you get started, make sure your non-executive director signs a confidentiality agreement. It will prevent them from associating themselves with your competitors while they are working with you.

Niche vs. Diversification

Up until now, owning a niche recruitment business has made sense. It’s simply not feasible to help your clients find potential employees to fill the positions that are out of your specialty. As a manager, you had to say ‘no’. Imagine you are a specialist marketing recruitment agency and your client asked you to find them a finance manager! It would be tough to decline their request, but you have to say no because you do not have a track record in finance. If at all you do oblige, you would have to commit your time and resources, engage in networking, go through a new set of applicants and get them interested in the opportunity etc for filling just one position. Once the position is filled, all your painstaking efforts wouldn’t reap any long term benefits whatsoever.

The current scenario has been changing and it’s only wise for a recruiting business to diversify. We know that diversification could mean a lot of work. It has become incredibly easy to operate across multiple specialties and be a jack of all trades with the advent of the dedicated professional services businesses. For example, you could entertain all kinds of clients and help them fill positions right from housekeeping and cafeteria to sales & marketing, finance and administration. You can simply associate with professional services businesses that specialize in housekeeping, accounting & bookkeeping, engineering, finance, etc. You could broker it out by recommending any of these professional services businesses to your clients depending on the kind of vacancy they want to fill. This strategy would not only help you diversify efficiently and cost-effectively but also earn you twice as much. Your clients will still pay you a recruitment fee and the professional services businesses pay you a referral fee depending on what you agree. a win-win situation for everyone. This concept is fairly new but we are sure it will catch on soon. We have a referral programme set up that can work excellently with recruitment agencies. If you want to know more about how our referral agreement could increase your income, please get in touch by emailing us at Info@sanaybpo.com. You could also call us on +44 1624 616620.

Identify and Eliminate Non-Profitable Clients

In the recruitment industry, the quality of clients matters way more than the number. As a manager of your business, there will be times when you have to deny service to certain clients, i.e., the businesses with a bleak prospect. The probability of filling all the available positions is usually very low. Your consultants would give their best to fill up 15-20 vacancies simultaneously. However, only 2-3 vacancies get filled in the end. You need to concentrate on quality rather than just the number of vacancies. Committing your staff to work on all the proposals would prove futile, that is why you need to sift through all the available live vacancies and pick those having the best change of actually being filled. It’s difficult to turn down customers, but with time, you would know how important it is to have a base of genuine with robust businesses.

Apart from all the other activities such as marketing your services to potential and existing clients, attracting the best talent and consistently training on your own staff to keep up with the changes, the above three ideas would certainly do a lot of good to your recruitment business. It will not only wider your market, but also reduce cost and enhance revenue and profitability to a considerable extent. We hope you found this article helpful. If you need to contact us with any queries please get in touch, we’d love to hear from you.

Cash Flow

Many business owners I talk to don’t have a problem growing their business, they have a problem managing that growth.

Often when a business grows rapidly without being prepared it can lead to strains on the owner’s time, stretched resources, unhappy and disengaged employees and pressure on the finances of the business.

Put simply, sometimes high growth businesses are too successful for their own good, or should I say that’s how they appear, when in all reality this can be managed before getting into cash flow difficulties.  Sometimes the peculiar situation arises whereby a successful business appears to really be struggling financially when they don’t need to be.

What follows is some practical guidance for businesses of all sizes and in all industries for managing their cash flow.

Cash Flow Fundamentals

First and foremost it’s crucially important to understand how the cash flow of a business works.  This is not the same as the profit a business makes.  It is absolutely possible for a profitable business to go bust if they don’t manage their cash properly.

At the most basic level, cash flow is the difference between cash coming in to the business and cash going out of the business. It’s that simple right?  Well, not exactly, some attention is required to maximise cash inflow and minimise cash outflow.

To ensure that cash flow is optimised we can concentrate on 3 key areas for maximum effect.  These being Inventory, Accounts Payable (or Creditors) and Accounts Receivable (or Debtors).  Let’s have a look at each in turn.

  1.    Inventory

The purchasing of stock which will be re-sold at some time in the future, possibly as it is or possibly after some adaptation, has the potential for tying up your cash.  If a business has its money invested in stock sitting in a warehouse then this can’t be spent on other things which may be of more immediate benefit to the business.  Not to mention that the longer that stock is held increases the risk of waste, theft or obsolescence.

Only enough inventory should, therefore, be kept to fulfil firm orders unless the item is something which can be used in many product lines as this could increase response time to customer orders.  The management of stock will require an effective supply chain but only that which is required imminently should be kept on hand.  Keeping large amounts of inventory can mean increased costs associated with storing, managing and securing that inventory.

  1.    Accounts Payable

As a general rule of thumb, paying suppliers as late as reasonably possible will positively impact cash flow.  Businesses large and small can take advantage of maintaining an effective and lean accounts payable function.

Where suppliers invoice on credit try to pay as close to the due date as possible, if you have a good reputation for paying on time you may also be able to negotiate extended credit terms meaning that your money stays with you for longer. Occasionally suppliers offer discount incentives for early payment, you should weigh up the benefit of the reduced cost against the benefit of extended payment terms at a higher amount.  It very much depends on each individual situation and would need to be balanced against how much cash you have and whether your cash receives any interest invested anywhere else.  If you’re short on cash you would probably be better not paying earlier than necessary.

A cautionary note, however, would be that not paying suppliers on time regularly can lead to reputation damage, supply chain interruption and withdrawal of credit facilities.  This is not a position you want to find yourself in if you already have cash flow worries and will certainly make managing growth harder than it should be.

  1.    Accounts Receivable

If selling to a customer on credit the first step before anything would be to determine the risk of selling to them by checking their credit history, whilst no guarantee it should reduce the risk of default on invoice payments.  If a prospective customer has a history of non-payment then you need to determine whether you want the sale more than you want the money in the bank…the two are not the same thing.

Quite the opposite of accounts payable, the aim in accounts receivable is getting paid as quickly as possible.  One way of doing this would be to reduce payment terms for as long as your customers will accept this.  Another very effective way of getting paid on time is making it as easy as possible for customers to do so. There are a variety of ways that this can be done from electronic invoicing to accepting other payment methods or offering incentives.

In addition to all of the above, consideration should also be given to the selling price of products based on how complex they may be to create and deliver, so that you charge commensurate with the complexity involved.

One of the larger costs that businesses often incur is staffing, it’s always important to review workload and determine up to date and realistic staffing requirements- perhaps hiring staff to work in support functions is not the best option, that’s where specialist professional services companies come in.

On a final note it’s important to realise that often the business owner’s time is not best spent managing the day-to-day cash flow, that’s where accounting and bookkeeping businesses such as Sanay can help.

Business Success

For many business owners who are trying to keep costs down, they try to do their accounting and bookkeeping themselves.  But these areas that can make or break your business success.  They are critical in managing your cash.

Here are some reasons you must not do it all on your own if you wish to be successful in your endeavour.

1.       Challenges in growing business

Starting up your own company will have several challenges.  You will need to come up with the right business plan, budget, and methods to manage cash flow, among other things.  But engaging with a professional bookkeeper or accountant can make life easier.

You may think that doing it on your own can help you save money.  But is it a good idea to use your time doing taxes or other accounting tasks?  Or are you better off spending your time focussed on growing your business?

How much is 10 hours of your time worth? During this time, you could already be driving new sales, winning a lucrative contract or developing your business in other areas.  It probably doesn’t pay off doing it yourself when you think in these terms.

And what if you make errors?  You are likely to do your accounts all over again, which can double the cost.

Getting an accountant to take care of your finances will actually cost less in the long run.  You will not only have the extra time to think about how to generate revenue but you will also have peace of mind knowing that an dedicated professional is already looking after your accounting needs.

2.       Getting back on track

It is easy to lose track as your business grows.  Outsourcing all accounting jobs can help you avoid losing control of how much is owed and from which customers.

Outsourcing accounting jobs will also help you with measuring key business metrics.

They can also help you manage your payroll and produce great reporting that lets you see periodic comparisons.

If you outsource your accounting jobs to a company that utilises cloud-based accounting software, you can easily and quickly look at your business accounts to better understand your current financial situation at any given time.

Overall, these can help you in monitoring your business and keeping track of your cash flow.

3.       Delegating tasks

It is natural to feel reluctant in allowing others to handle any part of your business.  But your inability, however well intentioned, to handle everything can ultimately damage your business.

Therefore, you have to let go of some responsibilities and allow others to handle some of the support functions of your business.  In that way, you’ll have more time to look after the core functions, support your customers and concentrate on what you do best.

Delegating accounting and financial affairs to others is a good start.  Successful business owners are delegating their work to the right people.

Getting the help of an accountant can help your business every step of the way.  Your job is to run your business.  Leaving the financial details to someone more qualified is a positive step in the right direction to helping your business grow.

One challenging aspect of business is keeping the books up to date and getting it right.  A simple accounting mistake can seriously damage your business.

Many business owners rely on their accountants in helping their business comply with taxes, payroll, bookkeeping and other accounting issues.

Listed below are some of the accounting mistakes that you must avoid, if you do the accounts yourself, to prevent significant damage to your business.

1.       Not prioritising receivables

Undoubtedly, cash flow is the lifeblood of any business.  If you are not enough money coming in, you will find yourself going backwards or worse going under.

When an invoice is issued, a receivable is recorded, when the customer pays, the payment is applied and the invoice marked as paid.

Not monitoring who has paid will leave you in a situation where you’re unsure who truly owes you money.  After all, making the sale means nothing if you’re not being paid for it.

You need to regularly and systematically monitor who has debts and how old they are.  You also then need to regularly request payment when payment is late.

As a result of not properly managing receivables, you may ultimately suffer from high bad debts.

To help avoid this, you may consider investing in a cloud accounting and online payment system. They can automate processing receivables to help you get paid faster.

2.       Not keeping track of expenses

Expenses are a necessary part of any business, be it small, medium or large.  Unfortunately, many business owners find themselves overwhelmed when it comes to tracking down receipts and other accounting documents.

If you don’t keep supporting expense receipts properly, it can result in cash flow problems, accounting and tax issues.

But saving a receipt for every expense can be cumbersome.  This is one of the reasons many business owners today are using cloud accounting and remote bookkeeping organisations to help them in organising business expenses and recording them properly.

3.       Not keeping personal and business finances separate

Combining the two can put your business at extraordinary risk.  It’s a common mistake that can be easily avoided but there are many small business owners who are still using one account for both their personal and business finances.

This problem can easily get out of hand.  Plus, this issue can cause problems with the tax authorities.  To avoid it, you should unquestionably have separate bank accounts for your business and personal needs.  Keeping things separate ensures that you don’t confuse what belongs to the business and what belongs to you.

4.       Not seeking help from a professional

At first, it’s tempting to handle all accounting tasks on your own to try to save money.  But, when your business starts growing, not hiring a professional can be a very bad idea.

You may think that you’re saving money by doing your taxes on your own, but, the truth is that this mistake can cost you a lot, further down the road. You might be overpaying tax, which is as good as throwing money away or underpaying your tax bill, which can lead to penalties.

Having a qualified professional taking care of your accounts can save time and money. You can concentrate on your core business and it will take the stress out of accounting.

Sometimes it can feel like you spend more time keeping the business going than actually developing it, improving it or adding any value.  The points below will highlight that while some form-filling and record keeping is necessary, much of the rest of it is either needless or can be outsourced.  Lightening the burden of bureaucracy can bring a host of benefits.

Necessity

Some of the more mundane aspects of business are necessary, in every industry, at every level, no matter who you are.  You can’t avoid it.  The truth is that some things just have to be done in order to maintain the status quo of the business or to fulfil important legal requirements.

Shift focus

There are, however, a multitude of tasks that many businesses (typically the owner, in small businesses) are taking care of themselves that don’t add value, but they still need to be done and take time to do.

This is where it’s important to shift focus, concentrate on the things that are core to the business and outsource the rest.  Activities like Marketing, Recruitment, IT and Accounting are considered support functions for many businesses (unless you happen to have a business specialising in any of these areas).  Maintaining these functions in-house, particularly for a small business, detracts from what the real focus should be, namely delighting customers and growing the business.  Outsourcing will help you focus your attention in the areas you know best.

Take control

So, you know where your skills lie, you know which things you need to be done (even if you don’t always like doing them) and you know the areas of support that a professional could help you with.  Outsourcing enables you to take control of the direction of the business by ensuring that you give less to the time sapping activities that, frankly, you might not be that good at.  It allows you to focus on setting the strategic directions and choices of the business without the administration or unwelcome distraction of your support functions.

Take bookkeeping for example, if it takes you 10 hours a week you could be using this time doing something else more ‘value adding’, not to mention that a professional will do it more efficiently.  Moving these duties to a specialist provider ultimately gives you greater control over the success of your business.

Enjoy the benefits

Rather than sitting back and enjoying the benefits you can now enjoy the benefits by working more smartly.  Being in business is not about sitting back, it probably will, however, eventually afford you the time for the lifestyle you’re working hard towards.

Outsourcing to a professional, skilled and passionate bookkeeping and accounting provider will bring with a number of benefits.  To name just a few…it will be cheaper than employing someone directly, it will give you more time to focus on your business and it will lighten the burden of responsibility.  You will have someone else doing the work that you once found a disturbance but it’s what they do; it’s their core business.  They will provide a simple process for you that will keep everything up to date and all of the information you require available whenever you need it and from wherever you are, particularly if they use cloud accounting software as we do.

Of course these are not free services but they are great value and it’s a very effective way of freeing up time to grow your business, especially if you’re a small business or a start-up.  We all know that things can be tight financially in the beginning but don’t ask yourself how much it will cost to outsource, rather how much it will finally cost you not to outsource.

Finance Function Outsourcing UK

Many businesses these days are looking to outsourcing as part of a successful long-term competitive strategy – one that cuts administrative costs and increases administrative efficiencies.  With the increase of cloud-based services and the increase in business-over-web communications, pretty much any business function can be outsourced.  In fact, the worldwide outsourced market was estimated to be $309 billion in 2013 and is growing at a rate of 25% per year[i]!

The reason for this is because the outsourcing model is one that has been tried and tested for many years.  To be successful in any outsourcing venture, it’s important to first pick the right function that will be migrated to a vendor company.  Finance is the perfect function to outsource because in most cases, this is an administrative function – one that does not provide income for a business.  Because it’s not a primary income generator, there are very real benefits that include decreased cost, increased expertise, flexibility and focus.

DECREASED COSTS

There are many companies that benchmark their administrative costs against similar industries to make sure that they are working as efficiently as possible.  The reality is that costs tend to run much higher for companies with internal administrative departments in comparison with those who outsource these types of functions.  Outsourcing, when done correctly, almost always decreases costs.  The reasons include:

  1. There are no benefits to pay. When outsourcing finance functions, such as bookkeeping and payroll, you pay for the outcome based upon the work being done.  You don’t have to pay for sick days, holiday pay, medical insurance, or retirement benefits.  Simply reducing these types of benefit payments can contribute to an immediate bottom-line impact.
  2. You only pay for what you need. When structuring your agreement with the outsourcing vendor, you define the types of services you will need.  Whether these services require 20 hours per week or 50 hours per week, your payment terms will be based upon your specific and unique needs.
  3. You reduce overhead costs. When you use an outsourcing firm, the vendor is now responsible for turning on telephones, paying the energy bills, setting up the cubicle space, purchasing office equipment, and paying rent.  While it’s true that these costs are passed on to the client, they are also shared amongst all the vendor’s clients so your portion remains much lower than it would providing those items in your own place.

 

EXPERTISE

When it comes to running a finance company, the name of the game is risk mitigation. Everyone has to pay taxes, everyone has to report company earnings and everybody has to make payroll.  However, one mistake or miscalculation could lead to years of litigation and severe penalties. Using an outsourced company for finance functions makes sense because:

  1. You have access to the experts you need. A finance company providing outsourcing specialises on one thing:  FINANCE! Whether you’re facing a thorny accounting issue or have specialised bookkeeping requirements, you can find whatever expertise you need to help meet your specific requirements.
  2. Best practices are put to work for you. A financial company must stay up to date on the latest financial trends, business practices and governmental requirements.  Vendors understand exactly what types of practices work best in order to better serve their clients. This takes the onus off the client to have to figure it out.
  3. The best technology and software is available to you. A finance company invests in the best technology and software available in order to be the most competitive in the marketplace.  This type of investment makes sense for the finance company because finance is the core business.  For companies where finance is not the primary function, making this type of infrastructure investment simply doesn’t make sense.

FLEXIBILITY

Businesses are not static.  The demand ebbs and flows.  In order to be successful, your business functions need to meet the demand as it changes.  By using an outsourced finance company, you can rely on the vendor to ramp up or dial down availability to meet your need.

  1. Their entire team is at your service. By using a vendor company, you don’t just have one or two employees – you have a team working to meet your needs.  If someone goes on holiday, your personalised service doesn’t have to stop for the week until she returns.  Instead, you will have people available to you when you need them.
  2. You have scalability. Suppose you’ve got some temporary projects coming up that will require a short-term increase in staff.  You simply let your vendor know your requirements ahead of time and the vendor can make sure you have the number of people you need to meet this temporary demand.  In addition, as your company grows, there’s no need for you to have to take the time and effort to go through the hiring process.  You let your outsourced vendor know that your needs have changed and let them quickly and easily adjust to fit your new workload.
  3. You have flexible availability. Not all business is conducted from 8 am to 5 pm.  Sometimes your business requires someone available on a second or third shift.  Instead of worrying hiring extra staff and worrying about hiring extra supervisors to manage the staff, your outsourced vendor will make sure you have staff at the hours that you need them.

FOCUS

Let’s face it; you are in business to perform your business function.  Unfortunately, as an owner, executive or high-level manager, you probably spend a good bit of your time on all the other things that have to get done.  Payroll needs approved, audits need reviewed, expenditures need initialled and issues need addressed.  Administrative functions often are huge time and resource consumers.  So, the final, but most important benefit to your business is that you can:

  1. Spend your time on your core business! Outsourcing means that you negotiate your financial requirements, figure out a plan to manage the day-to-day tasks and then step back and let your trusted vendor take care of the administrative section of your business.  This means that you get to allocate your time and energy on building your business, selling your product and planning for your future!

Although outsourcing has proven to be beneficial for many companies, there have been a few published stories that describe how outsourcing can sometimes go bad.  Good outsourcing vendors study up on these stories in order to better understand what type of relationship works best for both the client and the vendor.  Several themes seem to come up and it’s important to address these potential pitfalls, especially if you are a business owner and are considering some type of outsourcing partnership. Understanding what to avoid can help you better build the right relationship!

Managerial control is not well defined.  In most client-outsourced relationships, the single point of failure often comes about because the transfer of managerial control is not well defined.  The vendor may believe they should make managerial decisions while the client believes these decisions should remain with them.   Unfortunately, without a good discussion prior to creating the contract that delineates a clear description of duties and responsibilities, the relationship could devolve into arguing over who is supposed to do what!

Combat this by selecting an experienced outsourcing partner, understanding the terms of the agreement, defining your service level requirements and fully defining the relationship terms prior to signing the contract. 

Lack of customer focus.  Unfortunately, there are some outsourcing vendors that enter the market only to get as much money as possible without providing a quality product.  Luckily, these companies don’t stay in business long, but for the clients they sign up, they can leave a lasting negative impression.

Combat this issue by doing your research on possible vendors, asking lots of questions about their practices and policies so you fully understand the specifics of what the vendor company provides.  Vendor companies that overstate their results are easy to spot as their practices won’t match their sales pitch. 

Risk of data loss.  This is certainly a biggie!  With the increase of hacking activity and the need to keep personal data as safe as possible, outsourcing vendors have a responsibility to their clients to make sure that the client’s data is kept safe and secure. Some vendor relationships break apart simply because there has been a data breach or confidential information is not kept confidential.

Combat this issue by asking questions about how data is kept secure and how the client’s need for confidentiality is handled. Although the vendor must keep certain details a secret, the vendor should be able to describe their overall security strategy and offer reassurances as to how they address the issue.

Hidden costs. There seems to be a misconception that outsourcing companies hook you in with initial low prices and then spring hidden costs on you later.  While it’s true that a few un-reputable companies may do this, most vendor companies will clearly outline the costs for their services and will publish their prices for your review.  This helps you to better find the company that suits your needs.

Combat this issue by asking to see a list of costs associated with the services.  Hidden fees are also hidden in the contract details, so read through those details carefully.  Great outsourcing vendors will always be up front with you about costs and will be willing to negotiate in order to build a long-term mutually beneficial relationship

If you are a company that is seriously considering outsourcing some of your business functions, we hope that this list helps you get more information related to why outsourcing can be a great idea for your company.  We also hope that you have a better idea of what to ask of potential vendor partners and what questions you should ask.

[i] Lacity, M. C., & Willcocks, L. P. (2013). Outsourcing business processes for innovation. MIT Sloan Management Review, 54(3), 63-69

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