Finance for Recruitment Agencies: Pay and Bill or Invoice Finance?
When you first start a recruitment agency, you may have looked at different finance for recruitment companies options and decided on a Pay and Bill provider to help you to administer and fund your candidates payments. However, as your recruitment business starts to grow you may find that your Pay and Bill providers costs start to get cumbersome and a little bit on the expensive side as well, which is when you may decide to look at invoice financing instead. If you do decide to sign up with an invoice finance provider instead, then you need to understand the differences between Bill and Pay, and Invoice Finance and ensure you make the impact on your clients and candidates as low as possible. Here are some of the things you need to think about:
Pay and Bill companies tend to charge finance recruitment agencies based on a percentage of the gross invoice value including the costs to fund the invoices as well as the back-office processes needed. However, the cost of using a Pay and Bill company isn’t a true comparison with the cost of using invoice finance where the costs will be much lower once your contract/temp turnover exceeds £750k. With invoice finance you are also more in control of the costs you are incurring.
Some Pay and Bill providers will hold back candidate holiday pay, and PAYE and VAT elements of all of your contract and temporary placements which are usually held in your company bank account. On the other hand if you are using an invoice finance company they will usually provide you with around 80 to 90% of the value of the total invoice which means you also have the option of drawing down the holiday pay, PAYE and VAT if you need to as well as an element of profit if it is greater than the prepayment. These funds can then be held in your company bank account or given to the invoice finance company as a way of reducing interest charges.
Back Office Support
Pay and Bill providers will give you back office support, which is something that you won’t tend to get from invoice finance providers. Pay and Bill providers will not only raise your invoices, process the payments to your contractors, and look after credit control. However, even a Pay and Bill provider will expect you to undertake some of the back-office processes yourself, such as uploading timesheets and helping with credit control. You can always by taking on some internal employees or outsource it to a specialist service – which will probably be cheaper than what you would be charged by the Pay and Bill company.
Better Control over Debtors Book
Some Pay and Bill providers will raise client invoices on your behalf, but not give you any indication of how much your clients owe or whether the debt has gone over your contracted terms. This may mean that you carry on placing candidates with the same company which could increase your financial risk. By taking control of your back-office processes by using an invoice finance provider, you will have a much better idea of what outstanding invoices you have that are due for payment and also if there are any that are going to fall outside of your terms and conditions.
Improve your Companies standing with Clients
More often than not Pay and Bill providers will not hide their involvement in your company from your clients by using their company name on invoices and so on. This can dilute your recruitment agencies branding and sometimes can even compromise your relationship with your client if the provider angers them in some way. By using an invoice finance provider and taking your back-office processes inhouse, you will be able to keep all of your services under your own branding.
At Finance4Recruitment, we offer invoice finance recruitment solutions. For more information on how we can help you to discover if invoice finance is right for your agency, please get in touch with our office. You can call us on 0161 408 5303 or send us an email to firstname.lastname@example.org