Consider Invoice Financing and Payroll Funding before Starting a Recruitment Agency

Here’s what you should know about invoice finance and payroll funding before you launch.


So, you’ve been in the recruitment industry for a while. You understand the contingent workforce trends and, now, you’re thinking about starting a recruitment agency.

After all, it’s a lucrative line of work – if you get it right. Put simply, the recruitment industry is worth millions, as a wide range of businesses uses agencies to help find staff for roles from admin to labour hire, IT and medicine.

But, before you register your new agency’s name and start designing your business logo, there are a few considerations to make – especially in areas that may have been looked after for you in your previous roles, such as workforce finance: cash flow, back office, invoicing and payroll to be specific.

Cash Flow: Cash Flow Finance aids cash management

Firstly, for the success of your recruitment business, you must ensure you have enough cash flow to meet your contractor invoices, wages and taxes on time, every time. Late payments, or worse, errors can break a business before it’s really got off the ground.

The easiest way to keep track of your client and staffing requirements is to set up a back end system that clearly records the hours worked, pay earned and taxes incurred. This will help you achieve accurate invoicing and meet compliance.

Payroll Funding: A late debtor shouldn’t mean you can’t pay your staff

Secondly, a workforce funding solution like APositive can help chase any late paying customers, plus inject the funds you need to avoid trading in a negative cash cycle. Because there are no doubt recruitment agencies can easily find themselves falling behind due to the gap between the end customer paying and when you must meet your own payroll commitments.

So, whether your payroll cycle is weekly, fortnightly or monthly, it’s best to find a finance solution that integrates into your payroll process. This means, regardless of whether you outsource your payroll or manage it in-house, the service slots in seamlessly.

Remember, either the payroll amount could be advanced, or anywhere up to 100 per cent of your invoice value. This allows you to access your profit, or margin, upfront to help bolster your cash flow. Then, when your end customer pays, APositive remits the remaining part of the invoice back to you on the same day. It’s about advancing payments for your outstanding invoices so that you can unlock the value of your receivables early.

Check the code of conduct

Finally, don’t forget to check the code of conduct recommended for recruitment agencies and set out by the RCSA and ITCRA (soon to be APSCo). They are the leading industry and professional bodies for the recruitment and contracting services sector in Australia and New Zealand, of which APositive is an approved supporter.

For more information about starting a recruitment agency in Australia contact us today.

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