Recruitment Agencies Going Under
We show you the tell tale signs of recruitment agencies going under and how to spot it before they take your money with them.
Find Out Early
There’s no reason why you can’t check out your own agency to see if they can be given a clean bill of health.
After all you don’t want to suddenly find that they have collapsed from under you owing you thousands of pounds.
Copy of the Report
It’s quite easy to spot the factors that cause agencies going under to go into administration.
You can get a copy of your agency’s annual report from Companies House for a small fee. It might just be the best investment that you have made.
In the report, look to see what debts that the company have. That’s especially the long term ones that fall due after one year.
If they are high, the interest payments, as well as the debt repayments could be crippling them.
Look to see if they have any deferred payments for companies that they bought for inflated prices during the boom. They may not be able to afford to pay them now.
Look, obviously, to see if the IT agency is trading profitably. Even more importantly, see whether the Cash Flow has been positive or negative for the past year.
Look at the Net Assets. The last thing that you want to see is negative Net Assets. That’s a dead giveaway for agencies going under.
Also look at the turnover. It is not acceptable for the turnover to have fallen in the current market.
Agency Went Under
When RDL went under their turnover was actually up from £21m to £28m – but that was because of the extra income from their acquisitions M3 and SIG.
If you were sharp, you would have spotted that they had debts of £12m, when the company was only valued at £1.2m, and that they had negative Net Assets of £5.6m. That’s not a good position to be in when you had to pay out £5m in short order to your creditors in this financial year, i.e. the vendors of M3.
All of this was happening whilst they were making a loss of £40,000 in the first half of the year.
Those are the danger signs then.
Get yourself a copy of your IT agency’s annual report from Company House and check for yourself if there are any danger signals.
You may be glad you did!
Recruitment Agencies going under can take tens of thousands of YOUR money with them.