Invoice finance solutions have existed and expanded in the recruitment industry for numerous years, due to the very simple fact that agencies need to pay candidates on a weekly basis, in advance of the client settling their invoice. Below are several things we think you should know about and consider when searching for a recruitment financer:
1. Cash flow
Cash flow has been a problem for many agencies that operate in the contract sector. We have seen invoice finance solutions specifically tailored to the recruitment industry grow significantly in the last decade. Recruitment business owners need to be confident that they have the resources available to grow and the correct cash flow to match.
2. Financial support
The financial support allows an existing and successful agency or a brand new startup to engage in the contractor market. The recruitment market is unique and competitive and, therefore, understanding funding options is extremely important. Many agencies find their growth is restricted by restrictive funding and concentration limits that aren’t clearly explained from the outset.
3. Different invoice finance solutions
There are many invoice finance arrangements available on the market today and all of them differ in terms of cost, limitations to the business and the service they actually offer.
Factoring and invoice discounting services from traditional suppliers, such as banks, provide a source of cash but are costed depending on how much business you have with them and the drawdown available. You will be looking at funding up to 80-90% of the total value of your invoice as soon as those invoices are raised. This solution does help cashflow between now and when the invoice is paid; however, the huge benefit of this type of service is the price is very competitive, especially when compared to 100% finance.
3. Additional costs
You may have many additional costs, which for new start-up businesses is often difficult to get your head around at first; you will pay interest on the amount advanced to you and there will be an additional cost, often referred to as a service fee.
The longer it takes for your client to pay, the more expensive your factoring facility becomes, with interest continually accrued over time. These services provide a cash advance against the invoices that the agency is yet to receive payment for. Two major problems with this type of invoice finance solution is you are often left to deal with the credit control and, more importantly, it often does not include comprehensive debt insurance.
Choosing the right finance provider is, therefore, a critical step in an agency’s business plan. The right partner will enable you to grow and flourish, the wrong one may restrict your business success.
Quba Solutions is a specialist recruitment finance provider, set up by ex-recruiters who understand the challenges of the industry. We provide a 100% margin finance product and an online back office product that covers the complete scope associated with financing and managing temporary workers. From agreeing on credit limits online, adding assignments, paying temps via electronic or traditional timesheets to credit control, we can assist in the whole process.