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Invoice Finance for the Recruitment Industry

Recruitment industry invoice finance

Cashflow can be a big problem for the recruitment industry, this is where utilising an invoice finance service can be helpful. This article will explain the cashflow problems that are specific to recruitment; we will also look at what invoice finance is and how it can be utilised, as well as the specific benefits of invoice finance for the recruitment industry.  

Cashflow in the Recruitment Industry

One of the biggest problems for recruitment companies is around cashflow. Traditionally as a recruiter you will advertise a role, perform any necessary background checks and set-up interviews with no payment due until the position is filled and the successful candidate in place. Add to this, the fact that you may be required to pay temporary or contract workers ahead of being reimbursed by the company for which the employees are working; there are potentially a lot of outgoings before you can expect to receive any income. 

Your clients may be on 30, 60 or even 90-day payment terms following the recruitment of a new employee; this lag between work and payment can cause major cashflow problems that at worst can make the business unviable. Invoice finance can bridge that gap, ensuring that you have the cashflow for other business expenses while satisfying your clients requirements for the agreed payment terms. 

What is Invoice Finance? 

Invoice finance is a type of business financing that is widely used, and very popular in many industries. Essentially invoice finance allows you to be paid for an invoice more quickly than waiting for your client to make payment. The general process is as follows:

  • Raise a client invoice and send as per usual business policy
  • Pass invoice to finance company
  • Receive payment usually within 24 hours of up to 100% value minus agreed fees
  • Client pays invoice 
  • Finance agreement ends

This is an overview of how an established invoice finance deal may work, the payment terms would vary depending on the circumstances and deal agreed with the financing company. 

Recruitment Industry Specific Invoice Finance

As previously mentioned, your recruitment company may also be fronting the wages of temporary workers – invoice finance can also be used against these payments. Speaking to an experienced business finance broker such as MC Commercial Finance about invoice finance options would be an ideal first step to start the process of setting up a relationship with an invoice finance company. 

Many finance companies will offer an all-inclusive service that can alleviate some of the administration tasks, particularly those surrounding payroll such as timesheet management, making payments and producing payslips as well as invoicing the client. 

Once you have an agreement in place, you would have a handy online portal into which you can upload invoices and even worker timesheets for speedy payment straight into your business account. There are two types of invoice financing that can be accessed depending on your requirements and the relationship you want to maintain with your clients.

  1. Factoring – Also known as Invoice Factoring this option includes a full credit control service, where the finance company will chase for payment and manage debt where required. 
  2. Discounting – Referred to as Invoice Discounting this option is 100% confidential, your client would not know that there was any invoice finance being utilised and credit control would be managed by your own business.

Benefits of Invoice Finance

Many recruitment companies are smaller businesses that cannot afford to wait for invoices to be paid; this is where invoice finance can be an invaluable tool to maintain cashflow and enable the company to continue trading.  Some of the benefits of utilising invoice finance include:

  • Fast payment
  • Up to 100% of invoice value released
  • Fully managed credit control if required
  • Back-office support for payroll is available
  • Bad debt protection can be added if necessary
  • Improved cashflow
  • Less time spent on admin

Find Out More About Invoice Financing for Recruitment 

For all your business finance solutions the best place to start is a specialised business finance broker such as MC Commercial Finance. A broker can help ensure you get the best deal, and with the right company to fit the needs of your recruitment business. Contact MC Commercial Finance today to find out more about invoice finance for the recruitment industry, and to start the process of setting up a dedicated finance deal today.