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Stories Tagged ‘Permanent Recruitment 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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If you are looking to finance a recruitment business you are in luck as there are several options open to you especially if you are providing contractors or temps that complete time sheets. That said, if you are a permanent recruitment company there are also several options that are available to you.

If you are a recruitment company thatis paying wages weekly against signed time sheets there is a good chance your clients are only paying you monthly at best. Recruitment businesses or notoriously cash negative for this very reason and if you have a fast growing recruitment business this problem is only compounded.

So what finance solutions are available to you?

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Recruitment finance can be used by temporary recruitment companies to finance the growth of their business. It also allows the outsourcing of various back office functions. This form of recruitment finance allows recruitment companies to expand with the confidence that they can pay wages and the confidence that their administration will be done efficiently and professionally.

Recruitment finance will pay up to 100% of the invoice value the day after invoices are raised. This means that weekly wage demands can easily be met without having to worry if your clients are going to pay on time.

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Recruitment finance can take various formats. Typically it depends on the type of recruitment and also the size of the company. We will look at the three main options available:

Recruitment factoring: this is suitable for recruitment companies of all sizes and for both temporary recruitment companies and permanent recruitment companies. It provides an advance against invoices raised of up to 90% allowing temps wages to be paid. It is also suitable for permanent recruitment companies but prepayments are typically around 70% for perms. Recruitment factoring is available to new start businesses aswell as larger well established companies. It includes a credit control service and can also include credit protection to reduce the risk of bad debts.

Recruitment invoice Discounting: suitable for companies that are better established and have a good credit control function within the business. This type of recruitment finance does not include a credit control service. It can be confidential or disclosed and can include credit protection to reduce the risk of bad debts. Again it can be used for either temporary recruitment or permanent recruitment.

Recruitment back office solutions: well suited to recruitment companies that want to outsource the full back office function. This service can provide finance in the same way as factoring but 100% prepayment levels can be achieved. It also includes payroll and admin services as well as optional credit protection and credit control.

If you have a requirement for recruitment finance it is worth contacting Smart Factoring Quotes to discuss your options in detail.

I am quite often approached by clients who insist on using confidential facilities. The reasons for this can be varied and I always try to accomodate their requirement.

Traditionally confidential invoice finance has been hard to obtain as the only product available was confidential invoice discounting. The criteria for this were quite rigid and it was reserved for large, profitable business with a good finance and administration function.

The good news is that confidential facilities are now more readily available than ever. This makes the life of an invoice finance broker much easier as it means we have a wider range of products to offer clients based on their unique requirements.

Confidential facilities now include confidential factoring, confidential CHOCS there is a new confidential product due to be launched in January 2012 which we are quite excited about.

FS Audit Services have an updated website.

FS Audit services conduct periodic invoice finance audits and pre lend surveys on behalf of invoice finance companies.

Reports are produced using each lenders own template. FS Audit services believe that this will avoid any confusion internally and will enhance understanding through familiarity.

An Invoice Finance Quote is available from many places but at Smart Factoring Quotes we provide bespoke indicative terms for both invoice discounting and invoice factoring.

The invoice finance quote is based upon turnover, the number of debtors you have, the number of invoices you issue and our in depth knowledge of the invoice finance market.

Pricing is obviously an important aspect of any facility but it is imperative you look beyond headline rates. Take a look at our article about calculating factoring fees and also the article about comparing factoring quotes.

Recruitment companies often use invoice discounting however very few have optimised their facilities in the market place.

Invoice discounting is an ideal solution for temporary recruitment companies that are on monthly payment terms but have to pay wages weekly. The invoice discounting facility can be confidential which means customers are unaware and in comparison to factoring the facility is typically cheaper.

In terms of a recruitment company optimising an invoice discounting facility for both costs and cash generation they should consider the following:

  • use the invoice finance market to your advantage and look to see which lenders are hungry for new clients.
  • look beyond the headline rates and consider total costs over a 12 month period.
  • remember you are part of a preferred sector so don’t be shy to negotiate strongly to reduce rates.
  • when looking at cash generation ensure that limits are available at least for your top debtors.
  • look at how a concentration limit could limit your funding – this is very important if you have a customer that makes up a large part of your turnover.
  • consider raising finance against your perms – some lenders will offer a 70% prepayment against perms.
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