Building financially smart consultants
Why your staffing and recruitment consultants need to understand working capital (and how to teach them)
Consultant success is often measured in revenue, fees, and placements. But behind every strong month on the board is a deeper business truth: cashflow is king, and working capital can make or break your firm.
The challenge is that many consultants don’t understand the impact their decisions have on working capital. A high-margin deal might look great on paper, but if it’s coupled with long payment terms or costly delivery, it can drain your cash position faster than you think.
As a business leader, it’s your job to make financial performance more visible and more relevant to your team. Here’s how you can help your consultants think beyond fees and play a more active role in protecting and improving your working capital.
- Teach the trade-off: Margin vs Payment Terms
Consultants often chase the biggest fee, but don’t always consider when the money will arrive. A £20,000 deal on 120-day terms is not necessarily better than £15,000 paid in 30 days. Help them understand that cash today is worth more than cash in four months.
Tip: Include payment term scenarios in your deal reviews. Reward the deals that bring both good margin and prompt payment.
- Explain that margin doesn’t equal profit
High revenue doesn’t guarantee high returns. If a deal involves upfront costs (job ads, tools, outsourcing), it can eat into working capital even before payment is due.
Tip: Introduce a simple framework showing gross margin vs. net cash impact for common placement types.
- Stress the Importance of Accurate, Timely Invoicing
A small error such as the wrong PO number, missing documentation, or late invoicing can delay payment by weeks. Consultants need to own the admin and the details, not see it as someone else’s problem.
Tip: Include invoicing readiness in the placement checklist. Make it part of the placement success story and consider rewarding strong CRM and process diligence.
- Highlight the cost of start date delays
If a placement is agreed but onboarding or compliance drags, it’s not just operationally painful and risky to the deal, but it also delays invoicing and the cash that follows.
Tip: Show how chasing contracts or onboarding faster shortens the cash conversion cycle.
- Educate on the working capital impacts of contracting
Contract recruitment introduces a time gap if the contractor needs paying weekly, but the client only pays monthly, or later.
Tip: Use real examples to show how growing the contractor book without good terms can put serious strain on cashflow.
- Talk about client quality, not just quantity
A difficult-to-collect client is a hidden cost. Consultants should understand that some clients are high risk for cashflow, even if they seem like a ‘win’. Clients that keep your credit controllers busy are costing you money.
Tip: Encourage early finance checks on new clients. Consider rewarding consultants who secure business with creditworthy or prompt-paying clients. Where possible, consider reducing payment terms for slow payers.
- Align commission structures to cash collection
If consultants are paid commission based purely on invoiced revenue, it can create a misalignment. Some firms pay out commission once cash is received to ensure cashflow stays front of mind.
Tip: At the very least, show them the lag between booking, invoice and cash, so they understand what “earning” really looks like.
- Introduce cash forecasting into the sales pipeline
Sales forecasts tend to focus on revenue, but the timing of cash is just as important. A large deal due to be paid in four months won’t help with this quarter’s overheads.
Tip: Ask your team to flag expected payment timelines when submitting pipeline updates, not just placement value.
You don’t need every recruiter to be a CFO, but you do want them to think more like businesspeople. By giving them visibility of how their actions affect working capital, you can build a more financially resilient, commercially aware sales culture.
Good consultants make placements. Great consultants make profitable ones and bring the cash in on time.
If you are interested in giving your team greater visibility and insight into the financial side of the business and tools to help them measure their performance, take a look at Mercury Analytics.
Written by Daniel Fox.