Cash Flow Guide for Recruitment Agencies in Australia

The recruitment cash flow challenge

Recruitment agencies face a unique cash flow squeeze: you place a contractor and start paying them weekly, but the client doesn't pay your invoice for 30-60 days. If you're growing fast and placing multiple contractors, the gap between payroll outflows and invoice collections can hit six figures quickly.

Where the cash flow gaps come from

• Contractor payroll: You pay weekly. Clients pay in 30-60 days. Every new placement increases the gap.
• Permanent placement fees: Large one-off fees but often paid 30+ days after invoice, and subject to clawback clauses if the candidate leaves.
• Marketing and job board costs: Upfront spend to attract candidates - SEEK, LinkedIn, Indeed. Paid monthly, results come later.
• Growth = more cash out: Every new contractor placed means more payroll to fund before the client pays. Growth actually worsens cash flow in the short term.

How an overdraft solves this

A business overdraft funds the gap between paying contractors and collecting from clients. Draw to cover weekly payroll, repay as client invoices land. The facility revolves - ready for the next pay cycle.

We recently funded a $275K overdraft for a recruitment agency - approved and funded in 24 hours. That's enough to cover multiple contractor payrolls while invoices are outstanding.

How much do recruitment agencies need?

Rule of thumb: your overdraft should cover 4-8 weeks of contractor payroll plus operating expenses. For an agency placing 10 contractors at $1,000/week each, that's $40K-$80K minimum.

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