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Stories Tagged ‘Invoice Discounting’

The permanent recruitment sector has historically been neglected by the invoice finance industry. There was a time when the industry would not finance perm recruitment companies.

So why was the perm recruitment industry neglected?

It was neglected because of the perceived risk involved in dealing with invoices that related to permanent placements. With temporary recruitment the rates are agreed, work is completed, timesheets are signed and invoices are raised. If the hours are multiplied by the agreed rates correctly there is very little that can be queried. In comparison, an invoice for a perm placement is raised when the candidate starts work and sometime before they have even started. What happens if the candidate does not show up on the first day? What happens if they walk out after their first week? What happens if the company finds they are not suitable and let’s the candidate go? Typically there are various rebates due depending on when they part company. As such there is no guarantee that invoices raised will be settled in full if at all.

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Invoice discounting has often been reserved for larger, well established businesses and smaller businesses have been forced to accept invoice factoring.

The good news is that invoice discounting can be accessed by smaller businesses.

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We are often approached for finance by someone starting a new start recruitment business.

New start recruitment companies can range from an individual setting up on their own through to large organisations with ambitious recruitment plans and everything in between. Whatever the size of the business cash flow is key to ensure that contractors wages can be paid on a weekly basis. This is why finance is important.

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Cashflow Finance is currently under construction as a resource to help businesses who are looking for cash flow finance solutions.

The site will be aimed at businesses who are seeking advice about their cash flow finance options.

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Smart Factoring Quotes have updated their new website to include a new and improved quotation tool.

As an independent and impartial invoice finance broker, Smart Factoring Quotes are keen to attract businesses looking for a new finance facility or a business looking to review their existing facility.

The new improved quotation tool takes into account the criteria of your business and provides a quotation that is bespoke to your business.

The quotation tool is also now accessible from each and every page on the website.

Confidential invoice discounting is the ideal invoice finance product for businesses that want to do their own credit control and do not want their customers to know that invoices are being funded. Confidential invoice discounting provides businesses with working capital and will prepay up to 90% of the gross invoice value.

Confidential invoice discounting can however be very hard to come by due to the criteria invoice finance companies put in place.

Lenders look beyond the basic invoice finance criteria of selling to other businesses on credit terms and invoicing in arrears of delivery. Lenders will look more carefully at a businesses financial performance and they expect a robust balance sheet. Equally important are the processes that a business employs to collect in outstanding invoices.

 

For many businesses invoices discounting provides the cash that is needed to ensure that their business can survive. Without the necessary cash they cannot pay employees or suppliers. Customer payment patterns can be erratic and can cause cash flow issues and headaches.

Invoice discounting is typically the cheaper of the invoice finance facilities available to businesses. It can also be confidential meaning your customers are unaware of any lenders involvement.

In terms of qualifying for invoice discounting it really rests on processes rather than financial performance. Don’t get me wrong financial performance is important but without the right processes in place you will not qualify for invoice discounting no matter how profitable you may be.

There are 2 main process that will be looked at. Your invoicing process will be interogated. It is important that a good audit trail exists and that invoices are raised in arrears of delivery.

Your credit control process or procedure is also important to demonstrate that debts are collected methodically and professionally rather than not at all or on an ad hoc basis when you have time.

If your invoicing process is not right it is unlikely any type of invoice finance facility will be made available. If your credit control procedures are not adequate it is likely a factoring facility would be offered rather than an invoice discounting facility.

I see a lot of clients who insist from the outset that they want an invoice discounting facility but most of them don’t actually know why.

Invoice discounting is available and importantly it is more readilily available than it used to be. However, factoring is the easier facility to obtain is it represents lower risk to the lender.

So what can invoice discounting offer?

Confidentiality – yes invoice discounting can be confidential but some companies insist on a disclosed facility. Factoring, however, can also be a confidential facility or a disclosed facility.

Control – some companies prefer to keep the credit control in-house rather than outsourcing to a factoring company. So invoice discounting allows a business to maintain control over the credit control function. However, so does a CHOCS facility which is a type of factoring facility.

Cost – many feel that invoice discounting is cheaper. Certainly for larger businesses I would agree. However, at lower levels of turnover there is probably not a lot in it.

Rather than deciding that invoice discounting is what you want I think it is important to consider the structure of your facility, the characteristics you want and then the costs of such a facility.

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