Recruitment is a fast-paced business. Temporary recruitment agencies deal with a huge number of clients and there are often many financial challenges to accommodate. Recruitment factoring can be a useful tool for any temporary recruitment agency. Read on to find out more.
Cash flow management is critical for business success, but not all employers pay their invoices before the due date. Large companies often put a stop on invoices payable, to better manage their own fluctuating cash flow. This can have a devastating effect on small suppliers such as recruitment agencies. If one of your main clients, to whom you provide a lot of temporary seasonal workers, decides to delay paying a large invoice, it could be catastrophic in the run-up to Christmas. After all, you still need to pay your staff and workers on time, or the business will fold.
Recruitment factoring can solve a lot of these headaches!
What is Recruitment Factoring?
Recruitment factoring is an alternate name for invoice factoring. An invoice factoring company manages your sales ledger department. They pay you based on the equity tied up in the invoice, which gives you immediate cash to keep your recruitment agency running like clockwork. When the client pays the invoice, the money goes directly to the invoice factoring company.
A Flexible Service
The beauty of invoice factoring is that it is extremely flexible. You can use it for all your invoices, or in the case of spot factoring, just a few. Invoice factoring gives your recruitment agency access to a quick and easy source of cash. If you have a big client who persistently pays their invoices late, send them an invoice and then give the factoring company a copy of the invoice, along with approved timesheets. They release the cash, minus fees, and you don’t need to worry about chasing the client for an unpaid invoice.
If you have some larges expenses due and you don’t have the ready cash to cover them, pass some of your big invoices to an invoice factoring company and take advantage of the money up front.
The Advantages of Invoice Factoring
There are a lot of back-office costs associated with running a temp agency. Chasing clients and running credit control is time consuming. Using an invoice factoring service eliminates a lot of these costs, which gives you more time to focus on running – and growing – your business.
Building a sustainable business should be your priority. There is always a market for temporary staff recruitment, particularly seasonal staff, but you are competing against other players in the business.
Borrowing funds to grow the business or solve a temporary cash flow problem takes time and there are often a lot of hoops to jump through. Releasing equity from unpaid businesses lets you access instant cash, which can be used to sustain or grow the business. This eliminates any expensive interest charges on long-term borrowing costs and ensures your agency’s finances remain healthy.
In most cases, using an invoice factoring service costs around the same as taking out a business loan, so it’s a cheaper way of accessing short-term finance than applying for a short-term loan.
Do You Need a Good Credit Rating?
The other main advantage of invoice factoring is that your temp agency doesn’t need a spotless credit record to access the funds. It is your client’s credit history that matters; not yours. Look for an invoice factoring company that offers flexible solutions tailored to suit your business. Invoice factoring is a cost-effective finance solution, but it might not suit all businesses. If you would like to learn more about the advantages of invoice factoring, contact us today.
Latest posts by Portia McGrath (see all)
- 3 Simple Ways You Can Improve Your Back Office Efficiency - January 14, 2019
- Spot Factoring vs Standard Factoring - January 7, 2019
- What is Freight Factoring and How Does it Work? - January 2, 2019