Recruitment agency insolvency and rescue
Recruitment agencies, particularly those placing temporary and contract workers, are exposed to a working-capital gap: the agency pays its workers weekly while clients often pay on thirty, sixty or ninety day terms, so a growing agency can be profitable yet run out of cash. The options are the same in principle (Time to Pay, a CVA, administration or liquidation), but the speed of the weekly payroll cycle makes early advice essential.
The working-capital gap
Every new placement widens the funding gap before the client pays. Many agencies bridge it with invoice finance, so a problem with the funding line, a bad debt, or one large client paying late can trigger a sudden crisis, and not being able to pay wages is the red line.
When PAYE and VAT slip
Because the wage bill comes first, PAYE and VAT arrears often appear early in a recruitment crisis. Engaging HMRC quickly with a realistic Time to Pay plan can buy room.
Common questions
Why do profitable recruitment agencies run out of cash?
Because they pay workers weekly but invoice clients on long terms. Every new placement widens that funding gap, so a fast-growing, profitable agency can still run out of cash if a client pays late or a funding line tightens.
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