Article published on: 15/08/23
Insufficient funds can quickly impact the growth of any recruitment agency and ultimately put the overall business survival at risk - bad debt can quickly mount up if you have too much money going out and not enough coming in. Late invoice payments are a huge cause of cash flow issues in the recruitment world, below are some things you can do to handle overdue invoices.
Credit check new clients
This won’t help you if you are chasing current overdue invoices, but it can help you minimise the risk of any future late payments.
You can conduct your own background research, such as confirming financial history on Companies House and by using paid-for credit check platforms, or you can commission a credit check by a 3rd party provider who will put their findings into a report for you.
The report is typically a 6-year timeframe, however this can vary depending on which company performs the check and will present to you all loans, credit card purchases, mortgages and other borrowings that company has had a part in – giving you an overview of their credit health. From this you can screen all potential customers BEFORE working with them, to see if they could pose a risk due to past worrying activity such as bankruptcy or masses of debt.
Make payment easy with accurate timesheets
Whatever process you use for collecting timesheets, you need hours accurately inputted and signed off after each shift. Failure to do this can cause a delay in the processing of workers hours/pay, risk of clients getting invoiced for too much/ too little, workers sick pay potentially being missed and so on – leading to a potential delay in payment and the invoice becoming overdue.
If you primarily use paper timesheets, consider migrating to a recruitment back-office software, one that allows you to input hours digitally and your 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.
Maintain effective credit control
By agreeing explicit payment terms, making your invoices 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. However, not all customers stick to the terms agreed on paper and will often need payment reminders, this is where having a good credit control process is crucial.
There are several actions that can be taken to chase payment of an invoice, varying in severity. The lower end of the scale being polite email and phone call reminders to their accounts team, rising to more formal letters of action, and worst case, engaging with debt collectors. You may benefit from imposing late payment or admin chargers to encourage customers to pay on time, as part of your credit control process.
Explore an invoice finance solution
Invoice financing provides your recruitment agency with a cash advance by releasing funds from unpaid invoices as soon as they are raised. Often the pain points mentioned above will also be handled by your chosen funder as part of their service, or as part of an additional fee, ultimately helping save you time weekly.
By using your chosen financiers in-house credit control process, you will spend less time chasing invoice payments and have more time to focus on your business. They also will offer a credit check and the appropriate due diligence as part of their service and most funders have credit insurance included within their service, it’s always best to check when signing a contract with a new funder and discuss any additional costs you may receive.
After all, funders are trusted to work on behalf of their clients, and a high level of service should be a given in return. An invoice finance company that becomes an extension of your agency, allows you to free up time to concentrate on growing your business.
How Flo can help
At Flo you talk directly to the decision makers, they’re the people who make things happen.
We understand the pressures and when recruitment agency funding is essential i.e. on the right day for HMRC, suppliers or wages. We ensure the working lives of our clients are more streamlined and efficient.
Whether you are a new agency looking to get your business off the ground, or an established recruitment company looking for a bigger, better service than what you already have, CashFlo is designed to offer our clients a really practical, reliable funding solution.
Contact us on 01827 438065 or email firstname.lastname@example.org top find out more.
What our customers say
"By reducing the stress and worry of cash flow, payroll issues, invoicing and agency software, we have been able to confidently grow our business through the flexible approach that Flo have demonstrated to us. We are happy to recommend Flo Backoffice's solution to any recruitment agency and we look forward to continuing our relationship with them over the coming years."
Adele Smith, SAS Personnel Ltd t/a Coast2Coast Care