RAFFINGERS STUART RECRUITMENT NEWSLETTER AUTUMN 2014
SMALL DETAILS
BIG DIFFERENCE
5 Tips to Improve Your Cash Flow
Finance to Start or Grow Your Agency
Recruitment Benchmarking Survey
Cash Flow is crucial to the survival of any business.
Are you struggling to raise the finance you need to grow your business?
The results have now been gathered preview the key stats here.
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Contents
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PP SMALL DETAILS BIG DIFFERENCE
Welcome and Partners
02
Special Feature 5 Tips to Improve Your Cash Flow
03
Is Your Agency Expanding Overseas?
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Finance to Start or Grow Your Agency
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Employee Spotlight
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Alexander Ash & Co Joins Raffingers Stuart
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Case Study It’s the Small Things That Matter
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Assessment Days Should be Part of the Recruitment Process
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Are you Aware of the New Self-Employment Regulations?
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Recruitment Benchmarking Survey - Results Preview
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Partner’s Perspective Surviving a Tax Enquiry in an “Unfair” Age
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Welcome to our RECRUITMENT Newsletter We are extremely excited to welcome you to the very first edition of our recruitment newsletter.
Raffingers Stuart Partners
Gary Inglis Managing Partner
We have designed this newsletter to be bespoke to the recruitment market, bringing you only the most essential and relevant information.
gary.inglis@raffingers-stuart.co.uk
In this first edition we are pleased to launch the results of our Recruitment Benchmarking Survey, which was sent to agencies throughout London and Essex for their input. A preview of some of the results can be found on page 9. However, a copy of the full results can be requested through any of our partners.
Andrew Coney Partner
We also have 5 Tips to Improve Your Cash Flow, information on Finance to Start or Grow Your Agency and articles on the latest news occurring in the industry at the moment. We hope you enjoy reading this newsletter. If you have any suggestions for topics that you would like to see discussed in the next edition, please get in touch.
andrew.coney@raffingers-stuart.co.uk
Lee Manning Partner lee.manning@raffingers-stuart.co.uk 2 Adam Moody Partner adam.moody@raffingers-stuart.co.uk
The Partners at Raffingers Stuart Suda Ratnam Partner suda.ratnam@raffingers-stuart.co.uk
Barry Soraff Partner barry.soraff@raffingers-stuart.co.uk
Paul Dell Partner paul.dell@raffingers-stuart.co.uk
RAFFINGERS STUART RECRUITMENT NEWSLETTER AUTUMN 2014
5 Tips to Improve Your Cash Flow SPECIAL FEATURE
Cash flow is crucial to the survival of any business, and this is never truer than with recruitment agencies. With many agencies having to wait up to 30 days for customer payments, cash flow can become extremely tricky. Here are 5 tips, which can help you improve your agency’s cash flow. 3
1 Push for Early Payment It is common for most businesses to request payment within 14 or 30 days. However, imagine if you could be paid immediately. In order to encourage their clients to do just this, some agencies are beginning to offer discounts for payments received within five days of the invoice being issued. This incentive can not only improve your cash flow, but can also reduce the mundane and timely process of chasing invoices.
2 Make Your Payment Process User Friendly It may sound simple; however, it is
SMALL DETAILS BIG DIFFERENCE
surprising how many agencies still do not accept payments by debit and credit cards. Make it easier for your clients to pay you by having a clear process in place and through accepting a variety of payment methods, do not put any hurdles in the way.
3 Keep Control of Your Outgoings
To manage your outgoings successfully not only should you be negotiating great prices, but also timing your outgoing payments efficiently. Make sure you are aware of all of
your supplier’s payment terms and conditions and utilise them to your full advantage. While you need immediate payment, it does not mean you have to do the same. Delaying payments can help keep your cash flow healthy. This is especially true when prioritising due payments. Consider the penalties involved, it may be more beneficial to pay late an invoice incurring a small penalty in order to free up cash to settle an invoice threatening a large penalty.
4 Keep Tabs of the Flow of Your Money
Too often, businesses become
blinkered by profit and forget to watch the transfer of money both in and out of the business. It is easy to get carried away and to become more extravagant when solely focusing on incoming revenue. Instead, you need to concentrate on the surplus money you have after your bills are paid. This will help you remain restrained and will ensure your agency is not overspending.
5 Factoring Do not be scared to look at your agency’s bank account. When doing this, if you find you are receiving a high number of late payment penalties there is evidently a problem that needs addressing, and you need to ensure you try and refine your processes to improve this area next time. One solution is to consider factoring. Factoring can dramatically help your business through funding the shortfall between meeting wage commitments and receiving money from your customers. If you would like help in bridging this gap we can put you in touch with an intermediary who can provide you with 90% of your invoice value within 24 hours. For further support and advice on managing your cash flow, contact Adam Moody at adam.moody@raffingersstuart.co.uk
Is Your Agency Expanding Overseas? According to the latest UK Recruitment Index by Deloitte and the Association of Professional Staffing Companies (APSCo), 65% of agencies, who responded, are currently planning to expand overseas. These expansion plans have been made possible through increased turnover - 69% of agencies have experienced an increase in net income over the last 12 months, which has contributed to the majority to state that any new offices would be in new markets. The key motivator behind this is the increasing mobility of professional talent that agencies have to keep up with. However, in order to expand overseas, or indeed expand at all, agencies need to increase their headcount with quality talent, which 59% of agencies claim is their key challenge. To address this challenge, agencies are becoming more innovative with the benefits they offer to future employees, both for their clients and for their own firm. With competition from other recruitment agencies strong it is essential that this is done right. Flexible working is one of those benefits that are becoming increasingly sought after by professionals, which many agencies have started taking notice of and implementing in their offerings. To keep up with the market it is important agencies remain innovative and keep up-to-date with the motivational factors that drive different generations of professionals. This way they can ensure they are attracting quality employees, helping their agency continue to offer quality services and fulfil their ambitions of expanding overseas.
RAFFINGERS STUART RECRUITMENT NEWSLETTER AUTUMN 2014
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Finance to Start or Grow Your Agency Are you struggling to raise the finance you need to grow your agency from the bank?
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The small business loan market is restricted and banks still experience many challenges in helping small businesses with loan finance. Therefore, there is a significant untapped demand for businesses to invest. However, many small business owners either do not have the assets in the background or are, understandably, unwilling to offer them to banks for investment in their business, as these are often personal assets such as their home. Despite the UK economy recently improving, many small agencies are still struggling to access finance from mainstream sources, such as banks. GLE oneLondon is a leading CDFI, which provides loans and supports businesses across the UK with free advice to unlock their economic potential and grow. In 2014 and 2015, GLE oneLondon has over £15m of loan funding available
for small businesses that are both starting up and growing. This funding is dedicated to businesses having difficulty raising finance from conventional commercial sources. In June and July 2014 alone, GLE has lent over £2m to SMEs, helping create or protect nearly 750 jobs. One of those businesses was Theatre Tots Ltd, based in Lewisham, referred to GLE after an unsuccessful application with their bank. Theatre Tots Ltd provides drama sessions, workshops and shows for small children. GLE oneLondon provided £15,000 for the publishing of book apps, investment in merchandise and website development. Laura James, managing director says: “Discovering GLE was a turning point in our business development. From the first phone call Emma [one of GLE’s Finance Specialists] was reassuring, professional and attentive. It was so refreshing after a long and frustrating experience with our bank. The application process is very thorough and provided a
For more information or to apply Speak to Tehmina Mirza T. 0845 603 2820 or 07738858427
SMALL DETAILS BIG DIFFERENCE
brilliant opportunity to really look at your business position and the direction you are going in. Being a small business can be a lonely role and it is invaluable to have the time and professional input that GLE gave. The final stage interview was again an invaluable experience. It was structured in a way that was very useful, lots of insightful questions asked. I walked away thinking even if I didn’t get it, the whole process had been well worth the time invested. It’s not just about securing a loan, it’s about the advice and support along the way.”
Visit www.glebusinessloans.co.uk or www.glestartup.co.uk Email businessloans@gle.co.uk or sulenquiries@gle.co.uk
Alexander Ash & Co joins Raffingers Stuart We are delighted to announce that on 15 September 2014, we merged with Alexander Ash & Co. We continue to be known as Raffingers Stuart.
Employee Spotlight In this slot we like to introduce you to a valued member of our team, allowing you to put a face to a name. This quarter it is our Audit and Accounts Semi-Senior, Mira Patel. Name: Mira Patel Nicknames: After giving all of the guys upstairs female names, I now get called Mirry or all sorts of other Male names! DOB: 4 August 1989 Career history: I graduated with a degree in Accounting and Finance in 2010 from Leicester. After working in retail for two years, I finally joined Raffingers Stuart in 2012 taking my first step into the finance world and have been here ever since. After following my career path, I am now entering my last set of exams to be ACCA qualified and have achieved two years of great experience at RS. The light at the end of the tunnel is getting closer! Interests: Destinations, holiday planning, sun, heat, cocktails….i think you get the point, I love travelling! Once one holiday has finished, I usually start to plan the next. I’m an individual who enjoys going out and socialising with friends and family. As an early bird, I aim to be in the gym at 6:30am at least four times a week. This usually perks me up for the day. Partners Report: Mira is progressing at a great pace and is a valued member of our accounts team. She enjoys organising our team events even though she needs work on her table tennis and golf skills, although she did make up for it on our cocktail making social where she proved herself to be an expert.
The merger saw Alexander Ash & Co move into our headquarters in Essex. Paul Dell of Alexander Ash & Co joins us as a partner, bringing the total number of partners at the firm to seven, and expands our experienced accounts, tax, business advisory and corporate finance teams. Paul Dell joined Alexander Ash & Co as a trainee in 1986 and became a partner in 1994. Paul was instrumental in building their philosophy of providing the best possible service, exceeding clients’ expectations and proactively identifying opportunities and solutions for all clients. We are delighted that Paul has joined us as a partner, and look forward to working with him and the rest of his team. For all of our existing clients, we would like to take this opportunity to reassure you that the merger will have no negative impact upon the service you receive from us. If anything, with the merger, we hope to build on our success to provide even more value added services to our clients, as well as reach and support new businesses in the UK. We are always looking at new ways to improve the quality and variety of services we offer to our clients, with the new expertise this merger brings, the future is looking very bright.
For further information, please contact Gary Inglis at: gary.inglis@raffingers-stuart.co.uk
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It’s the Small Things That Matter
CASE STUDY
This Case Study explores one recruitment agency that on the surface looked as though it was growing and expanding in all of the right directions. However, in this process it was losing sight of the small and important things that matter.
Background One small recruitment agency that has been operating for four years in the London market is doing all it can to maximise its potential. As a result, the company is now specialising in a niche area of the market and is implementing innovative services to keep both its clients and placed employees happy. 7
The Challenge From the outside the business looks as though it is doing well - a specialist recruitment firm in London, building a loyal client base. However, with the forward thinking nature of the business, too much focus is placed on their services and marketing, and the agency’s internal resources and finances are receiving less attention. Consequently, the agency is experiencing an extremely high turnover rate of employees and has not properly reviewed its finances for nearly twelve months, instead leaving them in the hands of their accountants. The Solution With a high turnover of employees,
SMALL DETAILS BIG DIFFERENCE
the agency was spending far too much time recruiting, had poor employee morale and was failing to attract quality employees. We encouraged the agency to provide an employee incentive scheme that would help retain their team and would make them appear more attractive to future employees. The scheme we implemented was the Enterprise Management Scheme, which allows their employees to purchase shares from the company, at an agreed price. The employees then get access to these shares when they have either achieved their goals or have completed three, five or ten years of continuous service. In regards to the finances, we carried out a financial review and undertook a tax health check. This highlighted areas that needed to be urgently addressed. We also introduced them to a factoring company to discuss the benefits of releasing cash tied up in sales invoices. The Benefit The agency has now reduced its
“Thank you for your proactivity. Our employee morale was something that needed to be addressed for some time and you gave us the advice and tools in which to do it. It is also encouraging to know that we can now state, for the first time in four years, that we are taxefficient.” employee turnover and the team morale has improved significantly. The time that was once spent on hiring replacement employees is now spent on maintaining employee morale. With regards to the finances, the review highlighted areas where the company was paying too much tax, which was immediately addressed. It was also clear that the directors were not receiving the most effective remuneration package possible. We changed this so that they would receive a mixture of both salary and dividends. The agency is now in a much more stable condition. Through knowing they are on top of their finances and that their employees are happy, the agency is able to focus on its core business guilt free.
Assessment Days Should be Part of the Recruitment Process Assessment days are becoming more and more popular with businesses choosing this method of recruitment to allow them to really get to know their potential future employees. As a recruiter, do you agree with this method? If so, are you recommending it to your clients? Too often employers hire someone that is fantastic at interviewing, but in reality is not fully equipped to carry out the role successfully. Not only is this frustrating for the employer who has invested a lot of time and effort in the interview process, but also to you as a recruiter. You have invested time in your candidate and have your commission riding on their success. Furthermore, a bad match can often reflect badly on the whole agency. It is indeed difficult to always match the right candidate to the right role, especially if the candidate is good at putting on a ‘mask’ and saying all of the right things. Therefore, an assessment day reduces the risk of hiring someone that can purely interview well. At assessment days, it is harder for candidates to keep up a facade. You are finally able to see who they really are, how they interact in groups, how they really respond to situations, their true strengths and their true weaknesses. Therefore, assessment days are great at helping your client decide between candidates that appear similar on paper and weed out the weak candidates quickly. Employers no longer have to sit through countless first interviews that turn out to be a complete waste of time. Instead, only the best candidates from the assessment day can be selected for interview with a senior member of your client’s team, making the process easier, faster and more worthwhile than before.
Are you Aware of the New SelfEmployment Regulations? New regulations were introduced in the 2014 budget to try and stamp out false selfemployment, often via umbrella companies. These regulations were primarily aimed at agencies within the construction industry, although all agencies can be caught out. The regulations came into effect on 6 April 2014 and effectively make agencies liable for PAYE, if PAYE is not properly deducted further down the supply chain. End users themselves can become liable, but only if they provide false or fraudulent information to agencies to begin with. So, what does this mean for you? ● You have the obligation to deduct tax and National Insurance (NI) from all of your workers who are subject to “supervision, direction and control”, unless tax and NI is “accounted for under the PAYE regulations” by an intermediary. In essence, if the worker is employed by a bona fide umbrella company, who operate PAYE on the payments, then you should have fulfilled your obligations. It is therefore important that you try to only use verified umbrella companies. ● If any workers operate on a self-employed basis, via an intermediary, you need to have either the end user or the intermediary provide you with the documentation of the individual’s self-employment status. Without this the PAYE liability would rest with you and not the end user or intermediary. ● You should be making a quarterly return for all workers not subject to control and for all self-employed workers, recording their details and pay, reasons why tax and NI has not been deducted and details of the business supplying the worker. The first return is due by 5 August 2015 and will cover the first quarter of 2015/16. RAFFINGERS STUART RECRUITMENT NEWSLETTER AUTUMN 2014
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Recruitment Benchmarking Survey Preview of Results Recently, we sent a recruitment benchmarking survey to over a thousand agencies in London and Essex. Our aim was to obtain an in-depth understanding of the recruitment market as it stands today. We hoped that this would help recruitment agencies benchmark themselves against their competitors, as well as make informed decisions about the future of their business. The results of the survey are extremely encouraging with 91% of respondents recording an increase in turnover in the last 12 months, and a further 91% predicting an increase in turnover in the next 12 months.
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Although, the survey did differ to the UK Recruitment Index by Deloitte and the Association of Professional Staffing Companies (APSCo), which stated that 65% of agencies, who responded, are currently planning to expand overseas. When asked a similar question in our survey, only 7% of respondents stated that they are planning to expand overseas in the next five years.
91%
witnessed increase in turnover in the last 12 months
77%
expect to increase their workforce in the next 12 months
Instead, the main growth plans concern increasing the company’s headcount and achieving continuous financial growth. 77% of respondents expect to increase their workforce in the next 12 months alone. However, the biggest obstacle in achieving these goals concerns employees, with 42% stating that a lack of quality employees is their main hurdle. In an attempt to overcome this hurdle and retain and recruit high quality employees, many agencies are offering bonuses as their key incentive, with the average commission structure being 30% of revenue produced. Only time will tell whether this incentive will be successful. It is reassuring to see growth occurring in the recruitment industry. If you would like to see a copy of the full results, which include statistics on personal remuneration, bookkeeping and accounts and cash flow, please request your copy via Lee Manning, details opposite. SMALL DETAILS BIG DIFFERENCE
30%
average commission structure applied to revenue
For further information or to receive the full results, contact Lee Manning at: lee.manning@raffingers-stuart.co.uk
to hide” - why wouldn’t you just go along with the request?
partner’s perspective
Surviving a Tax Enquiry in an “Unfair” Age It’s been a few years now since HMRC changed the way it handled tax enquiries. The new procedures were trumpeted as a way of improving communication between taxpayers and HMRC. Looking back now however, this laudable goal appears to have been sacrificed, which is evident when considering exactly how the “new” procedures operate. After the taxpayer has been issued with a notice that he or she is to be the subject of an enquiry, the initial information requests start to arrive by letter - the first bone of contention. Too often these days, the HMRC officer will request information that they have a questionable right to receive. Where taxpayers are not properly advised they would most likely supply this information without a second thought. Assuming there is an adviser around, the first dilemma becomes whether or not to supply information that you don’t believe the officer is entitled to. Particularly where you have “nothing
There are several reasons why that might be dangerous. Firstly, there is a point of principle to establish – that the enquiry should be limited to those areas that are within the proper scope. Secondly, allowing HMRC to ride roughshod over their own rules will only encourage them to continue to do so throughout the enquiry. So, on the basis that you may be advised to reject an overzealous information request, what happens then? Under the new procedure, the HMRC officer will issue a notice to comply. That notice will have statutory force and will give the taxpayer 30 days to comply or appeal. An appeal however would involve an expensive hearing before a tribunal, and so to avoid that, the new procedures allow for an independent HMRC officer to review the case. This concept of a second officer review was adopted from the procedures used by the former Customs & Excise, when carrying out VAT enquiries. At that time the review was carried out in a scrupulously fair and transparent manner. Unfortunately, it is my experience that the review has since de-generated into a simple rubber stamp of the original officer’s view. This leaves taxpayers in the invidious position of either complying with a request they believe is unreasonable or attending a costly tribunal hearing, with no guarantee of success and no right to recover fees. It is hard to envisage, nor have I come across,
many taxpayers prepared to do that! So, having supplied the information and answering any further questions that have arisen, the officer will close the enquiry or issue an assessment for tax they believe is due. And where the question of that tax being due is contentious, taxpayers are then faced with the same process – independent reviews that are really rubber stamps followed by expensive tribunal hearings. In effect, tax payers are increasingly making commercial decisions not to fight questionable tax assessments because the cost of doing so is higher than simply paying up! So what can you do about this? First and foremost is to make sure you are getting the best advice, and if you are already a Raffingers Stuart client then it goes without saying that you are. Secondly, you should consider tax investigation fee protection insurance. Most advisers, including us, offer this service. It essentially means you will not always have to make strictly commercial decisions about accepting unfair settlements. Finally, when filing tax returns, it is a good idea to get advice about how you can minimise your exposure to tax enquiries. It is increasingly less likely that HMRC select taxpayers for enquiry at random, and whilst you cannot guarantee avoiding selection, there are definitely ways to reduce and manage your risk. Barry Soraff Partner barry.soraff@raffingers-stuart.co.uk
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Head Office 19-20 Bourne Court, Southend Road, Woodford Green, Essex, IG8 8HD Tel: 020 8551 7200 Fax: 020 8551 0912 Email: info@raffingers-stuart.co.uk London Office 3rd Floor, 5-10 Bury Street, London, EC3A 5AT Tel: 020 7167 6880 www.raffingers-stuart.co.uk facebook.com/RaffStu
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