Skip to main content

invoice financing explained

on Mon, 06/03/2019 - 11:38


Factoring is an attractive option for smaller or start up recruitment agencies whose resource would be better spent on day-to-day activities. A good financing provider will cover up to 100 per cent of your invoicing and also as part of the factoring agreement, manage credit control, payroll and timesheet administration on your behalf. This means your time is freed up to concentrate on running your business.

invoice discounting

Invoice discounting is  similar to factoring, in that it gives you
immediate access to cash as you issue new invoices. However, a key difference is that you’ll be responsible for collecting your payments.

is recruitment finance for you?

For many temporary Recruitment Agencies, factoring or invoice discounting are essential tools to fill the cash flow gap. By releasing cash against your outstanding invoices before they’ve been paid you can manage your cash flow, and your business, more effectively, without the risk of further debt.

The key though is to choose your finance partner carefully:

  • do they provide back office support in addition to funding?
  • as your business grows, how well placed are they to grow with you? Can their services scale from factoring and full back office right through to invoice discounting as your business grows and you look to bring some of your financial support functions in-house? what is their experience in the Recruitment sector? Do they understand the cash flow characteristics of employment businesses?
  • do they understand the compliance issues specific to the Recruitment industry that can have an impact on your finances?
  • do they have a transparent fee structure to allow you to forecast accurately?

invoice financing v bank loan

  • invoice finance is not a loan, so you’re not taking on any debt
  • no loan means no interest payments or late payment fees
  • if you choose a factoring service, you also get a dedicated credit control and payroll service, to proactively manage your bad or late payers. Banks don’t offer this.
  • to safeguard your business, you can choose to add bad debt protection to your factoring facility.
  • finance is released within 24 hours of an invoice being raised so no lengthy decision processes
  • invoice finance offers a scalable resource to grow with your business