Article published on: 19/12/22
Cashflow management is crucial to the success of any temp recruitment agency, especially when payroll commitments dictate recruitment staff are paid weekly and before clients have settled invoices.
Invoice financing for recruitment companies is a great short-term way to plug the gap between invoice payments and it can provide you with ongoing access to money for business growth.
When your financing runs smoothly and efficiently, you and your agency can look forward to improved cash flow and better working capital. By using your chosen financiers in-house credit control process in addition, you will spend less time chasing invoice payments and have more time to focus on your business.
Here’s our top tips on how you can make sure your recruitment business invoice financing is trouble free:
Always client credit check before supplying to them
Carrying out the right due diligence is very important when taking on and supplying to a new client.
Doing your own background research, such as confirming financial history on Companies House and commissioning credit checks by a 3rd party provider, will quickly inform you whether the business has good credit and can be a good customer.
If you work with a payroll management company, or alongside your financier’s in-house credit team, they usually offer a credit check and the appropriate due diligence as part of their service. Just be sure to inform their teams of your plans to work with a new client to ensure they are creditworthy before you begin.
Provide prompt and accurate timesheets
Whatever process you use for collecting timesheets, whether that’s via a third-party software, excel sheets, or even paper time sheets, you need hours accurately inputted and signed off after each shift - accurate/ signed off time sheets ultimately provide evidence for any potential litigation regarding wage and invoice disputes. Failure to do this can cause a delay in the processing of workers hours/pay, risk clients getting invoiced for too much/ too little, workers sick pay potentially being missed and so on.
If you primarily use paper timesheets, consider migrating to a back-office recruitment software, one that allows you to input hours digitally and clients to go in and approve completed timesheets. With paper timesheets the margin for human error is greater as they can be more difficult to read and it's easier to miss sections off, when filling them out. An electronic system will pick up on data errors and alert you before it is too late ensuring your data and payroll is as accurate as possible.
Get your invoices paid punctually
For your invoice to get paid on time, you should make sure the that you have done everything your side to get the invoice out correctly and on time to the client. By agreeing explicit payment terms, making your invoice accurate and easy to understand - including the correct bank details - and by sending the invoice to the correct person in the business, will all help improve your chances of getting your invoice paid on time.
This is very important for any business, the main reason being that this helps with your cashflow and depending on your arrangement, your financier may chase the invoice for you. However, you still need to invoice the client and hand over the details of the invoice to your financier.
Select an invoice financing solution that has credit insurance
Having credit protection - also known as bad debt protection - can ensure you operate safe in the knowledge that you still get paid if a customer should become insolvent or are unable to pay the invoices they owe.
Most funders will have credit insurance included within their service, or as an add on for a fee, it’s always best to check when signing a contract with them and discuss any additional costs you may receive.