(Pay)rolling into 2023: How fintech can help smooth the chaos of one of the busiest times of the year

Ann Juliano at Muse Finance explains why and how fintech can help with the traditional challenges faced by recruitment agencies at the start of the year

January and February are the most popular hiring months.

This is driven by two trends: firstly, businesses start searching for talent to help them meet their goals for the year ahead; and secondly, employees shake off any end-of-year inertia and begin looking for a better job.

It leaves recruitment firms inundated with demands from both ends of the job market – and means it’s more important than ever to ensure they don’t fall prey to cash flow issues caused by poor payment terms, unpaid invoices, and a general lack of visibility and control over their finances.

But how can they avoid those business-stifling troughs? Fintechs can make this busy period much easier.

New year, new recruits?

Only looking at headlines, it looks as though the UK jobs market is cooling in the face of recession. Thousands of employees at tech giants like Amazon and Salesforce are facing redundancies. Goldman Sachs is offsetting falling profits by making job cuts. Two-fifths of small businesses are planning on restructuring or making redundancies this year.

But almost half (47%) of working people across the UK are still considering new jobs. This isn’t just due to new year’s resolutions. The current cost of living crisis is causing further job-hopping. In fact, the most popular reason for switching jobs in 2023 is the need for a higher salary.

All of this movement builds demand and creates exciting opportunities for recruitment specialists and agencies. However without the right operational or financial functions in place, this could lead to lost opportunity.

When cash doesn’t flow

All businesses will experience cash flow issues at some point. But recruitment agencies face a number of particularly tricky financial hurdles.

Slow payment of invoices is the most common reason for cash flow problems. Clients may have slow internal processes or could even be facing cash flow issues themselves. Plus, billing errors or client queries often cause more delays.

Even when invoices are technically paid on time, the nature of the recruitment process can leave agencies out of pocket for weeks or even months. Companies like Bulldog Resourcing and KBM Resourcing act as the payroll middle-man for hundreds of thousands of temporary workers each, who are often paid on a weekly basis. However if agencies fail to set up favourable enough terms, they could be waiting 30, 60 or even 90 days for payment from their client.

Any actual delays to this payroll can have serious implications for its hires, and the relationships held with its clients.

When it comes to permanent hires, late payment of introductory fees for permanent clients can also cause problems with cash flow if the agency has an agreement to replace unsuccessful hires within one to three months. Essentially, they can be forced to invest time and money in finding a new employee for their client before receiving payment for placing the original worker.

Many recruitment agencies still don’t have the software in place to have clear visibility of their finances, making it difficult to monitor invoices, expenses and other important metrics. Digitising these processes will give them a clearer view of their cash flow and allow them to react quickly to any potential problems.

Fintech can save recruitment agencies time and money

During this busy time, recruitment agencies need better visibility of their finances and the ability to automate as many processes as possible to prevent back office overwhelm.

Fintechs such as Muse Finance now offer cloud-based accounting platforms that will give agencies a real-time view of their cash position. They also make it easy to establish which clients are behind on payments and automate invoice chasing.

Access to new financing products will also help recruitment agencies keep a flexible cash flow in the face of long payment terms. Invoice financing, for example, will let agencies unlock necessary cash tied up in late invoices for use whenever they need it.

This will provide a lifeline for agencies looking to service their clients and find roles for as many workers as possible throughout the January job-hunting boom.