When you’re supplying staff to other businesses on a temporary basis, you can experience many overheads and up-front costs before you actually receive payment from your clients, which can put a strain on your cash flow.
Invoice finance can be an extremely beneficial solution for businesses in the temporary recruitment industry. It will help to overcome a cash flow shortfall; giving businesses a stable and healthy cash flow, which is essential for running a successful business.
Let’s take a closer look at invoice finance solutions for staffing agencies and how it will improve cash flow and business growth.
How can Invoice Finance help Temporary Recruitment Agencies?
There are a number of ways in which invoice finance can help recruitment businesses that provide temporary staff who are employed on a timesheet basis and often paid weekly.
Covering Upfront Costs and Payroll.
As many agencies will incur costs before they are paid by their clients, invoice finance can provide them with the cash they need to cover these costs. Businesses can access the funds from their invoices (generally within 24hrs of the invoice being raised), this then allows the agency overheads to be paid as well as the payroll for the temporary staff.
Business Growth and Meeting Client Demands.
Invoice finance can help businesses to meet unexpected demands from clients, such as an increase in the number of staff required at short notice. By using invoice finance, agencies can free up cash that would otherwise be tied up in unpaid invoices and use it to invest in other areas of their business.
Reduce the Risk of Late Payment.
Businesses can access the funds from their invoices much sooner which can help to reduce the risk of late payment and any associated charges.
Maintaining a Stable and Healthy Cash Flow.
Invoice finance is a flexible and adaptable solution that can be tailored to the specific needs of temporary recruitment agencies. If you are looking for a way to improve your cash flow, invoice finance could be the answer.
How does Invoice Finance Work?
Invoice finance is a type of funding that allows businesses to borrow money against the value of their outstanding invoices. This can be a useful way for businesses to free up some working capital, as they will not have to wait until their customers have paid their invoices before they have access to funds.
There are two main types of invoice finance: invoice factoring and invoice discounting. With invoice factoring, the business sells its invoices at a discounted rate, this enables the business to receive an advance payment, which is typically around 90% of the invoice value. The invoice finance company will then provide credit control to ensure the invoices are settled and once the customer pays the invoice, the remaining balance less any associated fees are released.
Invoice discounting provides the same access to funds but here the business retains control of its credit control and is responsible for chasing up all payments. The business will still pay a fee for using the service, but in the absence of outsourced credit control, this is typically lower than invoice factoring.
What are the Benefits of Using an Invoice Finance Facility?
- Improved cash flow: as businesses can access the funds from their invoices much sooner, this can help to improve their overall cash flow.
- Flexibility: invoice finance facilities can be flexible, so businesses can choose an advance against certain customers and not others.
- Enhanced credit rating: as invoice finance can help businesses to improve their cash flow, this can in turn help to enhance their credit rating.
- Access to cash quickly.
- No need to wait 30, 60, 90 days or more for customers to pay.
- The ability to free up time spent chasing late payments.
- Easy to access with a straightforward and short application process.
- Generally, no additional asset or collateral requirements.
If you are a business that provides temporary recruitment, then an invoice finance facility could be an extremely useful way to improve your cash flow and expand your business. To find out more, please get in touch. We would be happy to discuss your individual requirements and provide you with a bespoke plan.