Trends over the past two decades towards temporary or contract labour hire arrangements gathered speed during the COVID-19 pandemic. Both private and public sector businesses are looking at contracted or temporary labour hire arrangements to successfully navigate fluctuations in demand and business uncertainties.
The labour hire sector in Australia is valued at $34 billion with Recruitment Services at $16.4 billion, employing over 2.4 million casual or contracted staff. In New Zealand the labour hire market contributes $1.9 billion to the economy. For the labour hire and recruitment businesses that facilitate this talent market, the challenges – particularly around cash flow, can be significant.
Why do businesses use an outsourced or contracted workforce?
In some industry sectors, contract workers constitute almost the entirety of operations. For businesses in the mining and heavy industry sector, as well as the construction industry and large corporations, a contracted workforce can deliver flexibility and reduced overheads. Businesses gain the ability to scale up or down quickly to meet demand, with less risk to their core operations.
For labour hire and recruitment businesses this can be a highly lucrative market, however difficulties can arise when a large temporary workforce is in place (often paid weekly) while larger clients pay their invoices at 30 days, 60 days or more.
The labour hire sector – challenges
Labour hire and recruitment businesses are committed to paying their employees on time; on either weekly, fortnightly, or monthly terms (depending on the contract and industry) however, they may wait much longer to receive payment of their own invoices from customers. This can quickly lead to cash flow difficulties when the business owes their contracted employees but haven’t yet received the funds to pay them. Pressure can mount quickly, with the business becoming consumed by the day-to-day juggle of managing cash flow effectively stalling opportunities for growth.
How can invoice finance help keep things moving?
By the nature of their business model, labour hire and recruitment companies can be at high risk of experiencing cash flow stress. For businesses with significant payroll obligations, very few can afford to wait 60+ days to be paid by their customers.
Your money faster
Invoice finance is a great solution for businesses looking to maintain cash flow certainty. An invoice finance facility helps businesses close the gap between when they invoice their customers and when they receive payment.
An Apricity Invoice Finance facility can deliver:
- Better cash flow – with funds available on approval, get your money back into the business faster.
- More flexibility – choose which invoices you would like funded, when and at what percentage (up to 95%).
- Supported business growth – enjoy the peace of mind when taking on a new contract, that existing and new obligations can be met.
- Better time/value of money – faster payments mean working capital is re-invested sooner, creating stability, less need for loans and larger returns.
Invoice finance supports growth
At Apricity Invoice Finance, we understand the challenges of running a business and how positive cash flow and flexible thinking can help businesses not only meet their financial obligations, but plan for growth. Too often business growth is hindered by poor cash flow with many stuck in survival mode rather than actively pursuing expansion opportunities and new contracts. For many, the risk is perceived as just too great. Our feeling is that this situation is unfair, limiting SME growth unnecessarily.
Invoice finance offers labour hire and recruitment businesses a stable platform from which to pursue growth. Find out more about how an Apricity Invoice Finance facility could help power your business growth.