Getting temps and contractors correctly paid, on time, every time is one of the most important elements of running a temp/contract desk and always has been. The challenge is that your candidates will often need to be paid every week or every month, with your customers generally paying on credit terms of between 30-60 days (sometimes longer). This leaves a gap between paying candidates and receiving money from your customers.
Trust is essential between your candidates and you as a recruitment business. If they aren’t paid on time, this could have a negative impact; on occasions we have seen temps move agencies to get the guarantee of timely payments. Also if your payroll processes are not efficient, the impact may not be just on your candidates, as customers want to keep their candidates motivated too so there could even be loss of customers.
For most recruitment businesses, this is where invoice finance can really help to bridge this gap, cash is key and using a method of invoice finance to facilitate this is very common in the recruitment market.
In the UK, there a numerous methods of invoice finance that business use to alleviate their financial pin points, so that you can focus on your business without the cash flow struggles. There is a choice of three main facilities in which recruitment businesses use:
- Payroll, invoicing and back office funding
- Factoring with or without credit control
- Confidential invoice discounting facilities
Typically this type of facility would fund at 100% and would pay temporary staff or contractors (weekly, bi weekly or monthly), invoice clients directly, mange timesheets (online or manually) with the provision of full back office systems to manage the pay and bill process. Normally with one fixed fee on the invoice value and often with NO SET UP or MINIMUM MONTHLY FEES – just pay as you go payroll!
Factoring is process that provides businesses with up to 90% of the gross invoice value (sometimes even 95%) normally within hours of raising the sales invoice to the customer (receiving the remaining 10% when your client pays).
In simple terms, the business raises the invoice, uploads it to the lender’s portal and then requests the amount of money they require. Some lenders will give you a choice of them undertaking the credit control or your business administering it yourself.
Confidential invoice discounting is a very similar process to factoring, the main difference is that the business is left to run the credit control, and the bank details on the bottom of the invoice to their customer are in the recruitment businesses name through a trust account. The business would also need to run monthly reconciliations to the lender through an accountancy package.
This service like factoring provides businesses with up to 90% of the gross invoice value normally within hours of raising the sales invoice to your customer (receiving the remaining 10% when your client pays).
Its not just temp/contract recruitment business which use invoice finance, look out for our next blog which is focusing on invoice finance for permanent placements and how getting up to 100% of the permanent invoice value as soon as the candidate has started can help!
Compare Recruitment Factoring is a specialist service to allow recruitment businesses to get the right product and best costings for a facility by comparing numerous leading providers and guiding businesses through the process from start to finish. If you would like to find out more please feel free to call us on 01600 735003 or email firstname.lastname@example.org.