Are you breathing a little easier?

I know we are already into July so discussing May results from RIB may seem a little Rip van Winklish but it is the trends that are important. For those participating in the Report, this news is already old news as you have received your iIndicator – so you know how you are tracking against the market trends.

So what’s the news? May results continue the positive trends witnessed throughout 2014 and have pushed 11 of the 16 RIB Indicators into positive territory. This is the first time in the financial year that contract and permanent volumes in the general RIB population have exceeded the prior year, an absolute sign of improved trading conditions for many – but this is coming off a very negative trend so no handstands just yet.

In the ICT Sector permanent placements remain a little soft and sit -4% down for the financial year to date, while the lift in average placement values (up 12%) has saved the day for many and keep permanent sales ahead of last year by 8%.

SkillsMatch and the Trends Report show the same pattern as contracting is a business and employment choice for many in fluctuating business markets – and election years – and when there is overseas disruptions through conflict and economic uncertainty. Trends in the recruitment sector are always the broader market temperature and I just wish that was recognised by commentators in the business community.

So, with permanent placements improving slightly and contractor hours processed showing a healthy improvement on the same time last year – it seems, for ICT at least, that market improvement is not an unrealistic expectation over the coming months.

To support this – at a recent ITCRA CEO’s Circle the Bank of Melbourne economist Andrew Pryor discussed the general state of the global market and Australia’s place within it. He covered a range of interesting indicators but, in summary, he commented that globally, the world is slowly recovering from the Global Financial Crisis (GFC), with established trading partner markets such as Asia showing growth with continued risk, and with opportunities available for Australian businesses in emerging markets, such as in Russia.

The overall impression of the market is that there are positives in terms of optimism expressed by the public through population growth, economic improvements, and investment. However, the business market is still recovering: soft labour markets and governmental adjustments remain in play – and these are certainly the key factors affecting recruitment activity.

At this meeting RIB Report Director Nigel Harse suggested that management and staff expenditure as a % of gross profit continue at record high levels in the recruitment sector – “ out of control” was the exact expression. The result was flat at 55% in May for ICT but remains high at 57% for the financial year to date. The recommendation, at the CEO’s Circle discussion, was that this should be closer to 42%.

The CEO’s Circle discussion concluded that the Australian economy should be considered in terms of recovering and changing. The ICT contract and recruitment industry, and industry generally, is feeling pressure from this constant change, with a shift in employment types being sought, margin pressures and policy changes at all levels of Government.
It was universally accepted that the industry has its own opportunities to improve its potential profitability and sustainability by questioning traditional approaches, exploring automation, and improving its international standing.

ITCRA Members are well placed to review and consider their business models using the resources available through our research and benchmarking program with RIB, Hart Consulting, HHMC and Bank of Melbourne.

And how do I know the light at the end of the tunnel is getting brighter:
• 1/3 of ITCRA Members renewed their Membership within 7 days of renewal notices being issued
• The number of new ITCRA Certified Professionals has doubled in the past 6 months
• ITCRA has just accepted 12 new Members in the last three weeks – thanks to OAMPS Insurance Brokers for
their support in this Member growth strategy!

My June 30 Report to the Board says it all: “ A great way to finish the year!!”

Start your 2014/15 year off with additional, no cost support, from the RIB Report and the Remuneration and Benchmarking Report – email julie@itcra.com for details – non ITCRA companies are welcome to follow up as ITCRA can assist you to benefit from these resources.

Invoice discounting and debtor factoring – good risk management or not?

Towards the end of April, I read an article in Shortlist on “Funding is the key to establishing a temp business”, which stated that: “Getting the funding right for a temporary recruitment company can make the difference between losing personal assets when a business fails, and getting a larger slice of the $19 billion the local industry is worth annually, while a particular model for calculating charge rates will make rates discussions with clients far easier to manage, experts say”. ( 29/04/2014)

I thought I would follow up with ITCRA’s Supporter in this space – Bank of Melbourne – to see if they had any commentary that might add to the article. This was particularly relevant, as I had just introduced a longstanding ITCRA Member to the Bank to discuss some options for developing a new business channel within the established company and they came away extremely positive about the models available.

Shane Dobney, State Trade & Cashflow Finance Manager from Bank of Melbourne, offered the following additional information which may be of interest.

” Certainly for a “start-up” business, it’s vital to have a Business Plan to present to your banker or finance provider. In addition to the usual financial forecasts (and their underlying assumptions), the Business Plan should include aspects such as the experience of management and key personnel as well as target markets / customers, sales strategies and the longer term vision of the business.”

Shane did not fully agree with the comment from the article that “contacting your local branch manager cannot be an effective strategy.” He said that “generally banks have business lenders located within their branches (definitely in the larger branches). However, these business lenders will usually only be able to manage smaller / less complex requests. This is certainly the case with Bank of Melbourne.”

Shane also added that “in relation to the points raised in regards to Invoice Discounting / Debtor Factoring, Bank of Melbourne only offers confidential facilities whereby the debtor is not aware of the funding arrangement between the borrower and the Bank and the Bank’s model funds up to 85% of the GST-inclusive amount of the borrower’s invoices which is greater than the amount quoted in the article.

As the Shortlist article indicated Invoice Finance is certainly a viable alternative to seeking further external equity for IT Contracting and Temporary Labour firms. Invoice Finance is used widely across those two sectors to manage the ongoing funding of contractor payroll and Bank of Melbourne has certainly seen an upswing in companies contacting them for support and advice.

References: Shortlist article – Funding is the key to establishing a temp business

Bank of Melbourne Finance Solutions