A guide, not advice. This explains how things generally work. A licensed insolvency practitioner will tell you what applies to your company or to you.
Insolvency for Recruitment Agencies
Recruitment agencies operate on a model that is cash-intensive and exposed to client payment behaviour. Placing candidates is one thing; being paid by clients - and managing the cash-flow gap - is another. Agencies are particularly vulnerable to client bad debts and timing pressures.
Our Manchester-based, ICAEW-licensed practitioners have experience helping recruitment agencies through financial difficulty.
Why Recruitment Agencies Fail
- Client bad debts - a major client fails, owing significant placement fees
- Cash-flow timing - paying contractors weekly while clients pay monthly
- Thin margins on competitive placements
- IR35 and status changes affecting contractor placements and income
- Sector slowdowns reducing placements
- Key staff departures taking clients and candidates
Sector-Specific Considerations
Contractor Pay and IR35
Agencies that pay contractors weekly while clients pay monthly face a permanent cash-flow gap. IR35 changes have affected the structure and margins of contractor placements.
Client Debt Risk
Agencies are heavily exposed to the financial health of their clients. A single major client failure can be devastating.
Key Person Risk
Recruitment is a people business. The loss of key consultants can take clients and candidates with them, rapidly undermining the business.
Your Options
- Negotiation with clients and contractors on payment terms
- Invoice finance - to bridge the cash-flow gap
- CVA - restructure debts while continuing to trade
- Administration - protection while the business is sold as a going concern, preserving client and candidate relationships
- CVL - orderly closure where the business is not viable
Speak to a Licensed IP
Recruitment insolvencies need practitioners who understand the cash-flow and key-person issues. Our Manchester-based team will assess your position honestly and advise on the best route - free and confidential.