Recruiters can learn from Carillion chaos

The biggest business story of 2018 so far has, of course, been the collapse of Carillion.

What was the UK’s second largest construction company, involved in major projects such as HS2 as well as managing and maintaining schools and prisons, went into liquidation on January 15th, having run up massive debts of around £1.5 bn.

Since then, the knock-on effect on the company’s many suppliers has become more apparent, as supplier after supplier – including several recruitment businesses – have outlined how they’ll be impacted.

Specialist engineering firm Van Elle, for example, is owed £1.6m and had expected to bring in another £2.5m from Carillion by April – but having reported £10m in operating profits last year, it’s expected to cope.

By contrast, two engineering and tech recruiters have had their share price rocked by the affair: RTC Group had to clarify that while it had some exposure to Carillion’s collapse, its general trading was strong and performance would be in line with expectations. Gattaca’s shares fell 9.3%, prompting a statement that while it had historically provided recruitment services to Carillion most of its debts were covered by a credit insurer, reducing its exposure to less than £100,000.

The good news on bad debt

It’s this last point that’s worth noting. Carillion issued several profit warnings in the year leading up to its demise – giving Gattaca ample opportunity to make sure any substantial debt would be covered by credit insurance. And that move has now paid dividends, helping the company weather the storm and ensuring it can continue trading as normal.

Many businesses, particularly smaller suppliers, won’t be so fortunate in the fall-out from Carillion. Some of those will be in recruitment; but there’s no reason why they couldn’t have had the benefit of credit protection.

The very nature of recruitment means you’re dealing with a range of clients from long-standing to new, working on fairly tight margins. Your business is at the mercy of your clients’ success or failure, and so it’s vital to be forewarned and forearmed.

That’s why, unlike many providers, Back Office offers unlimited credit checks and credit protection as part of our standard package for complete peace of mind.

Credit checks can be easily integrated before you supply a single temp or contractor to any new client, and once a credit limit is established and you trade within it, you’ll be fully protected against bad debt in the case of insolvency*.

So if it leads to more recruitment businesses making use of the protection available against bad debt, and more of them survive as a result, perhaps something good will have come out of the Carillion failure after all.

To find out more about our bad debt cover, click here or call Back Office on 01260 280 290.

 

 

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