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What are the advantages of invoice finance for recruitment agencies?

Published on 5th July, 2024

Maintaining a good cash flow is crucial in any business and can prove especially challenging at times for temp recruiting agencies who are obligated to pay temp workers weekly, whilst clients often work to 30+ day credit terms. Not having the funds to bridge the gap between paying workers and receiving what is owed can quickly impact the growth of the agency and in the early days, put the survival at risk.

So, what can you do to ensure cash flow is managed correctly, and agency longevity ensured? 

Introducing invoice finance for recruitment.

The concept for invoice finance is quite simple. Rather than having to wait weeks for your invoices to be settled by your clients, a lender uses an outstanding invoice as funding security, giving you quick access to a large portion of that invoice almost immediately.

How does invoice finance work?

1. You place your candidates and raise invoices as usual, invoice your client and send a copy to your invoice finance lender.
2. The lender will then usually release up to 90% of the gross invoice value.
3. You pay your temps.
4. The remaining money is released once the client pays and the invoice is settled, minus the lenders charge or fees such as interest.

What are the advantages of invoice finance?

• A more secure cash flow – one of the biggest advantages to an invoice financing facility is the improvement it can make to your available funds, putting you in a better situation to cover expenses as they occur or maximise opportunities as they arise.
• You can access funds quickly– they can often be released within 24 hours of it being available to a customer.
• Flexibility as you grow– the amount you can borrow increases as your earnings do, allowing you to access more funds than through a more traditional loan or bank overdraft.
• Qualifying ease– for most companies without financial issues or unfavourable credit history, invoice finance is straightforward to apply to and be eligible for
• No risk to assets– in many cases the invoice alone is the only security that is needed, you won’t have to offer up physical assets from your company and customer creditworthiness is in the hands of the lender.
• Credit control expertise– credit control is managed on your behalf by the recruitment finance lender – so instead of chasing late-paying customers, your time is freed up to focus on growing your business 
• Ability to extend payment terms– having the flexibility to alter payment terms when needed, to meet industry standards or customer expectations can be a real bonus.

Invoice finance in summary.

Invoice financing for temp recruitment agencies allows them to improve their cash flow, pay employees and suppliers promptly, plus reinvest in operations and growth earlier than they perhaps could have done, if they had to wait until their customers settled their invoices. SME and start-up recruitment agencies particularly can enjoy quicker expansion and development in a much shorter time frame.

At Flo we offer a transparent and straightforward funding solution for temporary recruitment agencies, making our client lives easier. With CashFlo, we are 100% focused on the recruitment sector and have developed our processes to reflect our extensive knowledge of how recruitment really works.

We have no hidden fees or add-ons for you to consider, simply a small percentage to pay on invoices and up to 90% of the invoice paid to you quickly. Please get in touch via 01827 438065 or send us a message for more information.