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Recruitment Finance

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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As a small business factoring can be an ideal solution for your working capital requirements. Factoring does not require you to be well established or even profitable. To qualify for a factoring facility it is more important that your business has the right processes in place, is in a suitable sector and has good quality customers.

Processes

A small business needs to ensure that it’s invoicing procedure is suitable for invoice finance. This means you should create a good audit trail. Agood audit trail for a factoring facility will differ from business to business. For a wholesaler it will include a purchase order, a proof of delivery and an invoice raised in arrears of the delivery. A temporary recruitment company will have a signed agreement, signed time sheets and then invoices submitted on the back of those timesheets. The key is to prove that your product or service was requested, prove that is was delivered to the satisfaction of the customer and as already described that the invoice is then submitted in arrears of the service or product being provided.

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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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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 is a new site that has been launched by the Cash Flow Solutions group.

While it is still under development it will provide an in depth guide on what facilities are available for recruitment companies.

Recruitment companies typically access recruitment finance to allow them to pay wages of their temps. This can take the form of a simple invoice discounting facility, a factoring facility with the added benefit of a credit control service or a full back office solution that provides a full back office service.

We were recently approached by a haulage business based in Glasgow who wanted to review their facility. It was a very nice business and they advised that they had only ever reviewed their facility with the Scottish banks. Given the recent well publicised problems they wanted to look at other alternatives. It should also be stated that they are a Scottish registered company.

While we knew the companies that could provide factoring Glasgow to a Scottish registered company we decided to go back to the market to see if anyone new had this capability. We were delighted to see that a few new lenders now had the capability to help businesses based in Scotland and were very keen to do so.

In short we were able to source a very competitive facility for our client.

If you are a business based in Glasgow or anywhere else in Scotland it really is worth exploring what opportunities are available to you.

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