Recruiters: Tips to Retain Margins on Fees

One of the top challenges facing recruitment professionals in today’s competitive market is how to retain margins.  Temp and contract desks gross profit as a % of sales remains under pressure and has put immense pressure on cash flow.

What can you do to retain margins and improve your cash flow?

• When negotiating with clients position around value

Be clear about the added value you will provide.  Good planning and an effective negotiation strategy you can minimise price concessions, and increase both sales volume and profit margin.

• Compare value not price

Shift focus from price comparisons to value comparisons; for example a value focus discussion “I know cost is important, but I am committed to ensuring your needs are meet. Let’s come back to the cost once I fully understand your needs. To ensure I am able to do this I would like to further explore…”

• Build negotiating space into your proposals

Structure your deals expecting room for negotiation. Consider increasing the scope of what you are proposing by offering added features or service. You can then offer to work with the customer to cut scope in an effort to meet the customer’s true needs at a lower price.

• Exchange price concessions for true commitment

When a customer asks for a price concession, experienced negotiators deal with this by trading price for major commitments. Something like: “If I am able to do candidate X at that fee, we need to know that we have a firm deal. Do we have your commitment?”

• Invoicing negotiate on payment terms

Usually invoices can be on 30-90 day terms with customers, temps and contractors often expect to be paid on a weekly/fortnightly basis, which can potentially cause a shortfall in cash flow.  Set payment terms earlier to relieve the pressure of covering payroll.

• Consider Payroll Financing

In many cases agencies are left to cover the payroll costs before getting the funds from clients so make sure that you factor finance costs.  At SDP we understand the importance of keeping margins and gross profit healthy, we provide the best value financing options starting from 0.4% and allow you to cover the payroll and take the net profit upfront.

• Effective Receivables Management

Stay on top of outstanding receivables, ensure you have a sound process to track and collect overdue invoices.

–          Issue invoices promptly

–          Monitor your account receivables on an ongoing basis

–          Send reminders – send friendly reminder emails simply reiterating the due date and how you accept payment

–          Don’t wait – When chasing late payments the longer you wait to collect the payments the harder it is.

• Keep back office costs low

Streamlining and automating back office tasks can lower your costs by 75%, save you time and eliminate expensive and frustrating errors.  Freeing up the time of Consultants means they will have more time to focus on growing the business.   If you haven’t considered either outsourcing your back office operations or even embracing payroll and contractor management software it’s time you upped your game.

If you would like to read more on Contractor Management Outsourcing Vs In-house please click here to view our Article on Streamlining Contingent Workforce Management, To Outsource or Manage In-House?

At SDP Solutions we offer tailored solutions to reduce costs and mitigate risk for recruiters.  We have been operating for over 11 years in payroll and contractor management solutions for recruiters, businesses and contractors and we also provide full back office support and white label contractor management software temPay.

If you would like to learn more about how SDP can assist your agency in reducing costs and improving cash flow, we would be happy to meet over coffee to discuss call us on 1300 409 070 or alternatively click here