Organising your start-up costs and making a budget are a crucial part of writing your business plan and from the outset of starting your recruitment business, you will need to think about how you will manage your finances.
Financial Considerations at the start
The following questions may be useful in thinking about your business’s financial future, budget and cost savings.
- Will you be paying rent on an office space or working from home?
- Will you need staff from the outset?
- Will you use a bookkeeper and/or accountant? Typically, a bookkeeper will record all the transactions of your business as you go along. An accountant can help set financial projections for your business as well as advising on a vast range of financial matters from tax and cash flow to investment and debt management.
- Will you be seeking financial support?
- Will you need accountancy software?
- Do you want to invest in software designed for the temporary recruitment industry? Making the right decision about this at the start can save you time and money further down the line.
Making a Budget
A budget is a financial plan and a key component of your business plan. It helps you better understand the figures on which your business operates. Even a basic budget enables you to:
- Gain control from the start by enabling you to see what sales are required to cover costs.
- Make decisions about the direction of your business by forecasting and planning growth strategies.
- Identify excess spending and areas that could benefit from reinvestment such as staffing, and marketing campaigns.
A budget can give you the insight and confidence to move forward with your business as well as provide the documentation you need if you are seeking financial support.
Basic Profit and Loss
The most basic of budgets should record all outgoings to give you a total of how much you need to earn each month to cover costs. You must include:
- All payroll costs (staff wages, insurance and benefits)
- Overheads (recurring payments like rent, etc.)
- Repayment commitments (loans or credit card bills)
- General business expenses (supplies and sundries)
- Equipment or tools bought for your business which will depreciate over time.
As well as recording your outgoings, your budget should show all areas of recurring, regular income and projected income. As a new agency, you may not have reliable evidence of income over a significant period of time and will have to record best and worst case sales scenarios.
A balance sheet tells you what your business is worth, based on what you owe and what you own. Your assets are the value of your business, including:
- Equipment and stock
- Cash in the bank
- Unpaid invoices (those sent out but not yet paid)
The other side of the balance sheet is your liabilities, including:
- Bills you owe
- Taxes that are due
- Loans or debts to repay
Your business is worth the total of your assets minus the total of your liabilities. Including a balance sheet in your budget and business plan is especially important if you are looking for financial support.
Finances and Sales
As part of your business plan and budget, include financial forecasts, sales targets and a plan for generating sales revenue for the first 6-12 months. Again, evidence of this is crucial if you are seeking outside funding. If necessary, small business advisors at banks and business support organisations can help with financial forecasting. If you are using the services of a chartered accountant, they will also be able to help.
By gathering the financial information outlined above and creating a basic budget, you can see the cost of running your business, how much you can pay yourself and how much you have to reinvest. Your financial planning will need to factor in your cash flow and tax liabilities.
Planning for Tax Payments
Your business will have to take on one of four legal structures which will impact your taxes: a sole trader, partnership, private company or a public limited company. An accountant or solicitor can advise on this and offer advice on tax liabilities.
Cash flow can be unpredictable at the start of a new business venture and it might be helpful to think about the following:
- It is crucial that your invoices are paid on time. You must state your payment terms on any contracts, invoices and in your Terms and Conditions.
- Using software designed for the temporary recruitment industry can help you understand and manage your cash flow by automating invoices and adding remittances to your sales ledger.
- You may want to consider a risk-free funding solution for the temporary recruitment sector. These can offer you flexible funding by providing your new business with 100% of your Gross Profit each week, giving you the confidence to invest in your business knowing you will have the funds to make weekly payroll.
- Think practically and with your cash flow in mind when it comes to staffing. Consider whether or not you can get jobs done on a freelance basis rather than having to employ those skills permanently.
The Right Tools for the Job
Software Designed for the Temporary Recruitment Sector
As you are planning your finances and day-to-day running of your new business, think about whether you will be investing in software to help manage your business operations. It is wise to invest in the best product you can from the outset. Changing at a later date can lose you valuable time and money. Consider software designed specifically for the industry that can help you manage your high administration tasks as well as keeping you compliant. The right software can help you:
- Save money by streamlining and automating key administrative tasks, from timesheets to invoices.
- Speed up day-to-day business operations and help avoid costly human error.
- Keep compliant by helping you avoid costly fines and damage to your reputation that can come with operating a non-compliant agency.
- Save time and money to invest in other areas of your business.
- Manage security demands and avoid potential penalties. A reputable software provider, with a secure cloud-based system will make regular updates and software patches.