While it is obvious that a relocation company’s primary objective is to assist corporations with the relocation of their employees or recruits from one job location to another, acting as a banker is not always considered a function of a relocation company. In fact, accounting departments are the underappreciated backbone of relocation.
Most Master Services Agreements between a corporation and a relocation company have terms that are between 45 and 120 days. However, employees going through the disruption of a relocation, often needs funds very quickly. A Relocation Management Company provides the cash flow to that employee so they can continue with the process of relocation, even though the RMC may not be paid for another 100 days.
Sometimes funds are needed the same day. Landlords need security deposits to hold a property for a prospective tenant. Overseas Estate Agent’s or Temporary Accommodation’s need funds to move to the next step with the employee. Employees need funds because their last relocation expense maxed out their credit card. There are many examples like this. Our Controller has called this “Firehall Accounting” – rushing payments out to employees and various vendors, while making sure that they are accounted for as a client expense rather than an operational expense.
High Degree of Responsibility
In fact, the service is a significant convenience to corporations whose accounting processes have become less nimble over time. In many cases, paying a vendor in under a week is next to impossible, never mind the same day. It is far more convenient for the RMC to make and account for the specific payments to suppliers, as well as reimbursements to employees. To do this, the RMC must handle a substantial amount of funds on behalf of the client and account for them appropriately amongst a large number of clients and transactions.
An experienced RMC is equipped to order authorized services, verify that they are successfully provided by qualified suppliers, and pay the suppliers on time. These expenses are typically referred to as “Direct Costs.” Often, they involve very large outlays, such as paying closing costs on a new home or paying for a substantial household goods shipment.
Supplier Management meets Cashflow
In many instances, companies cannot possibly form a multitude of one-transaction relationships that are likely required to relocate their employees. It is far easier to contract once with a Relocation Management Company and have them do their supplier management due diligence with all the many vendors that need to be paid during a relocation. In fact, supplier management and cash flow go hand-in-hand. Many corporations need to sign cumbersome Master Services Agreements even for one service, or at least require vendor verification forms that, in turn, are cumbersome for the one appraiser in Grande Prairie. That is where the Relocation Management Company comes in. They create large and ever-growing supplier networks with vetted suppliers, ensuring that they are in place in their accounting system so that they can be paid in a timely fashion. If these vendors aren’t paid in a timely fashion, relocation can ground to a halt.
Recruits are kind of like new vendors to many corporations
Like the problem of large corporations paying new vendors, sometimes reimbursing a relocated recruit can be problematic for a large corporation. The recruit is not yet on payroll – they are not an employee – which can handcuff some companies from reimbursing them back for legitimately incurred relocation expenses. That is why so many opt to pay recruits in one lump sum through payroll after their arrival at destination, but this is not tax efficient, and does not help the cashflow requirements of most recruits that are relocating. Relocation Management Companies can extend these funds, while watching the tax code, accounting properly and giving full reporting to corporate clients during and after relocation.
Give a virtual high-five to your RMC’s Accounting Department
So, the next time you relocate someone (or multiple someones), remember that while the Relocation Consultants are busy keeping the employee’s relocation experience moving forward and ensuring that the employee and family are happy, there are crucial actions going on in the background, from supply management to day-to-day accounting that are also greasing the wheels of that relocation. Hey, let’s give those accounting departments a virtual high-five. Without them the relocation could go very differently.