Industry sector: Business services

Staff agency: Cash from debtors

Some recruitment businesses treat the total amount that they receive from all clients as their turnover or 'sales', while others just look at the 'margin' or commission that they make on supplying temporary and contract labour (plus any income from other sources, such as permanent recruitment services). For the purposes of completing the cash flow, it is recommended that you treat all money received by the business as turnover.

Much of your income is likely to come from account-holding clients, to whom you send invoices at regular intervals (for example weekly or monthly). Income from temporary recruitment services will normally fall into this category.

You may also decide to send out invoices to clients for some of the other services that you provide, such as permanent recruitment and staff training if you offer these, rather than asking for immediate payment.

When you receive payment for invoices that you send out, it is referred to as 'Cash from debtors'. You might typically receive these payments as cheques, bank transfers and perhaps card payments.


It may be the case that you receive most of your payments from a factor (or invoice discounter), to whom you send a copy of each invoice that you write. A factor might make regular payments to your business, for example weekly. Treat all payments from a factor as Cash from debtors, even those that are paid 'in advance' of the debt being collected.

If you don't have a non-recourse agreement with your factor then you will be required to pay back any advances that you receive against invoices that subsequently become bad debts. Any repayments that you make should be deducted from your Cash from debtors total in the month in which the repayment is actually made.

Payment terms

Make your payment terms clear by printing them on your invoices. You might, for example, specify that payment should be received within 30 days of the date of the invoice. You should, however, be prepared for some clients to be slow to pay. Realistically, expect many clients to take around 40 days or so to pay their invoices.

Think about what steps you will take to follow up overdue invoices and whether interest will be charged on these. You will want to strike a balance between efficient debt collection and maintaining a good working relationship with the local business community.

Special incentives

You will probably want to offer your clients some special incentives, perhaps to encourage them to pay their invoices promptly and also to retain their loyalty. Think about whether you will offer early settlement discounts (for example 2.5% off the invoice amount for prompt payment), loyalty bonuses and even things like corporate gifts and hospitality. Weigh up the cost of offering these incentives with the benefits to your business.

Your business stationery

Have some invoices printed for sending to clients. A good printer will be able to advise you on layout and style. If you are registered for VAT you must include your VAT registration number on your invoices.