The temporary recruitment boom: Can your cash flow keep up?

After a winter of industrial action, the UK is facing a fresh wave of strikes. Teachers, postal workers, firefighters and many other unionised workers are holding walkouts in early 2023. This is causing gaps in vital public services across the country. In many places, temporary staff are stepping in to plug resource gaps.
March 06, 2023
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Meanwhile, people across all industries have increasingly turned to private work as the cost of living pushes them to seek higher wages. The flexibility afforded by temporary work also appears attractive to those experiencing post-pandemic burnout.

For recruitment agencies, all this is causing sudden and pronounced spikes in demand. This is difficult to manage operationally – financially, it’s even harder. A big part of the challenge is cash flow. To weather the storm of fluctuations, agencies will need to address these issues sooner rather than later.

Capital Group: A cash flow case study

The NHS is under particular strain after December saw the largest UK healthcare strike in history, with further actions ongoing. Up to 10,000 patients are expected to still be waiting for treatment at the end of March. The system is becoming increasingly reliant on healthcare recruitment agencies to provide workable staffing levels. This unsustainable dependency is causing major concern for patient welfare amongst healthcare professionals.

As a result, staffing agencies are seeing huge peaks in demand – at first glance a positive for business. The difficulty is that those peaks are hard to predict, leaving these agencies exposed to cash flow challenges if they don’t have the right tools and processes in place. Let’s explore what that looks like in practice, taking healthcare staffing agency Capital Group as an example.

Unpredictable demand

Capital’s success at this time will depend on their ability to manage their cash flow effectively. This will involve accurately forecasting future revenue and expenses, as well as maintaining a healthy balance of incoming and outgoing payments. The current demand inconsistencies will make this more difficult and make other cash flow issues worse.

Capital Group provides support to multiple essential parts of the healthcare sector, wth locum doctors, homecare nurses and many more specialists on their books. Some of these areas are set to strike in the coming months, while others will continue to work. Managing multiple, contrasting pictures will make accurately forecasting their future cash flow a difficult feat.

All these issues can be better managed by ensuring better visibility of finances. Bringing in a cloud-based accounting platform rather than relying on legacy financial management software is one answer.

This will allow agencies like Capital to integrate their business banking and accounting package to view upcoming invoices alongside business expenses, creating accurate financial projections. This means that any shortfall will be identified long before it causes any problems.

Slow payments from clients

Throw a challenging economic environment into the mix and it could be that agencies are finding their clients are slow to pay invoices. This can leave them struggling to meet their own financial obligations, such as paying their temporary workers or covering their operating expenses.

Paying healthcare staff is particularly complicated. To cover this cost, agencies will invoice the NHS trust that employees worked for (potentially a number of different ones at a time). If one or more of these trusts struggles to meet their agreed payment terms, the agency could be out of pocket for some time.

Capital Group itself has multiple income streams, offering training courses as well as temporary healthcare staff. The invoicing process and payment structures for these are likely to be different, and making sure cash flow lines up with outgoings will be particularly tricky at this time.

To help ensure they always have the capital they need to meet their obligations, fintech solutions can help here, too. An automated invoice chasing solution will help relieve the burden of getting paid on time by chasing invoices that are near or overdue. Outsourcing this process will help keep the books in order, and prevent back office staff from becoming overwhelmed at an incredibly busy time.

High (and climbing) expenses

Temporary recruitment agencies can face a range of high expenses, such as advertising, office space rental, and insurance. If these expenses are not managed effectively, they can quickly eat into the agency’s profits and create cash flow problems.

Capital’s expenses could increase or fluctuate due to the inconsistency of NHS wages – such as the higher rate paid for night and holiday-cover shifts than for day ones. Increased demand could make this far trickier to manage.

Factor in rising interest rates, rent and the general costs of living, expenses are only growing. This won’t leave much room for error when organising the agency’s outgoing costs vs income and ensuring there’s still a tenable margin left.

Again, getting long-term visibility of incoming and outgoing payments will help Capital Group prepare for growing expenses and ensure their expected income matches up.

Weathering the cash flow storm

With careful management and an informed focus on profitability, agencies in the healthcare sector can overcome these challenges and maintain a healthy cash flow, even in times of flux.

Rather than relying on legacy financial management software, healthcare recruitment agencies should move towards tools and approaches that allow them to have full visibility of their finances, automate the work they can, and make accurate forecasts. This will allow them to focus on what they do best – supplying the best talent to an important sector, at the time they need it most.

Original Article: Employer News

Get the best candidates with our proven recruitment methods, Contact our recruitment specialist Gareth Allison or give us a call on 02920 620702.

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