Many start-ups ignore the importance of back office efficiencies electing instead to save initial investment in software. While cashflow for start-ups is a critical focus, this might be a false economy.
It is important to consider the back office systems and procedures that are essential to the efficient running of an agency. It minimises time spent on internal processes and, at the same time therefore maximises the profitability of the business.
This may be fine if the business is placing just a few candidates or temp contractors into roles which can be relatively easily managed using spreadsheets or other processes, but few agencies don’t have plans to grow and expand this part of their business.
There are typically two sides to the back office setup with the first being the front end job advertising, management of applications through to candidate selection, interview, job offer and commencement. If an agency is using a manual system to track this front end process, candidates can be missed, resumes not stored and opportunities lost especially if there is a high volume of applicants for a particular role whether this is a perm or temp position being filled.
There are plenty of Customer Relationship Management (CRM) software providers competing for customers that range from the global players such as Bullhorn and JobAdder through to smaller local providers that also have sophisticated platforms to offer and that may suit the smaller and new start agencies especially from an initial pricing perspective.
The other side of the back office setup and critical to those agencies providing temp contractors or labour hire is the timesheet to invoice software. As a new start agency, the temptation may be to save costs by starting with a manual timesheet process to record hours worked which are then applied to the agreed rates and an invoice manually created to send to the customer.
This would require a manual process using Excel spreadsheets and complex formulas in order to manage the onboarding, rostering / job allocations through to timesheet and invoicing. It is essential that formulas calculating any award rates are double checked to ensure that the correct rate is paid to the contractor. It’s also essential to ensure that invoices issued are correct to ensure no delay in the payment of the invoice by the customer.
Whilst this may be manageable for those agencies with only a handful of contractors, as the business expands and the contractor numbers increase, significant amounts of time can be wasted weekly chasing up contractors over the phone or by email for them to submit their approved timesheets that have been manually signed by the onsite approving manager.
Pressure can build quickly each week if not all timesheets are submitted as invoices have to be raised based on the approved hours and weekly payroll processed. Having a manual process for both the sign off and submission of timesheets can lead to errors on invoices leading to delays in payment by customers as well as incorrect amounts paid to contractors.
The investment and implementation of an electronic time sheet system from day one can save a lot of time and frustration. It’s during the early days of a new agency that time can more easily be invested on the set up and learning of a new electronic platform (CRM and/or timesheet) as opposed to later when the business is overloaded managing manual processes and claims to ‘not have time’ to investigate and set up a new platform that ultimately will provide efficiencies and minimise errors in the critical invoicing process.
In addition to time management and invoicing, many platforms also provide other critical functions which can include rostering and calculation of award rates which are essential for agencies operating in the blue-collar space or labour hire businesses that have many award rates that they have to be compliant with.
APositive provide finance to hundreds of recruitment businesses. They have analysed their own customer base of recruitment and labour hire businesses to see whether having an electronic timesheet to invoice system in place results in customer invoices being paid quicker compared to agencies using a manual process. The research shows those agencies using electronic timesheet and invoicing are paid on average nine days faster than those agencies using a manual process.
Not only does an electronic platform assist by saving management time but also assists the agency to maintain a healthy cashflow. There is your justification for management focus on this important topic.
APositive Workforce Finance Consultant
After finishing University in the UK, Marc has built up twenty years of experience delivering finance solutions for growing businesses. Having worked with clients from start up to those turning over hundreds of millions, Marc particularly enjoys seeing the results that customised finance facilities deliver for start-up and SME businesses.
Rod is a 35-year veteran of Australian and international IT and corporate advisory organisations. His executive-level credentials traverse many segments of the staffing and recruitment industry and include corporate advisory assignments, mergers and acquisitions mandates, and C-level advisory to multinational and other public and private organizations. Located in Perth, Rod founded HHMC to provide local industry acumen and global knowledge to Asia Pacific recruitment agencies. HHMC’s innovative business strategies and well-grounded guidance result in clients realising their personal and corporate goals.