Is your finance solution restricting the growth of your recruitment agency?June 1, 2018eps_admin
Starting your own recruitment agency is hard work but rewarding…growing your recruitment agency can be even harder!
One in 3 new businesses, not just recruitment agencies, fail in their first year. So, what is the reason and why then, do people continue to opt to go it alone?
The primary reason for failure, is that the majority of recruitment business owners underestimate the complexity of the administrative and regulatory burden and the costs to make their start-up successful. Many overlook the fact that, especially in recruitment, there is a time delay in funding their workers each week and customers paying your invoices. You may not be paid anything until at least 4 to 6 weeks after you’ve paid the workers.
Finding clients, securing credit insurance, agreeing trading limits and negotiating payment terms, all take your time. Whilst waiting for invoices to be paid, you still need to pay the workers each week. To grow at the pace you want to, that funding gap becomes increasingly more significant. The funding gap or the wrong funding solution, can hinder your appetite for growth and success.
This is where Invoice Funding is invaluable to the recruitment sector.
There are various options available. Long gone are the days where a bank loan was the only way to increase your funds; in fact, nearly 50% of all SMEs, actively avoid bank loans. These are short-term, high-interest solutions to a long-term problem.
Invoice Funding, on the other hand, can provide you with the tools you need to grow your business.
A direct funding arrangement with a bank will need managing; there are regular audits, you need expertise in payroll, credit insurance, credit control, and unfortunately, on occasion, the legal process. Invoices need matching to timesheets and distributing on time every week and as your business grows, so too do these tasks. With a direct invoice finance arrangement with a bank, you will be restricted by a funding line, a drawdown percentage, the age of the debt, concentration limits. To increase the facility limit when you’re successful, takes time as the business case needs to be considered and approved by the bank’s Credit Committee. This all takes time, sometimes a few months at best… thus restricting your growth and ambition. Late payments can swiftly leave you without the funds to pay workers and escalating invoice costs.
An alternative solution is the combination of an invoice funding arrange combined with full back office support…
Why would you consider this approach? Did you even know it was an option?
In short, it gives you time and peace of mind to focus on what you do best…recruiting!
With this option the invoice funders will secure the credit limits on your behalf, before supply of labour, negotiate the best payment terms, pay the wages of your workers directly or send funds to umbrellas on your behalf, invoice your clients on your behalf, in your agency name with your agency logo. Collect the debt and pay you your margins the same week your workers are paid, all for one simple fee.
There are no audits, you don’t need a back-office team of experts, there are no concentration limits, there is no facility to manage with the bank, your workers are guaranteed to be paid provided there is a credit limit and terms of business in place and no adverse situation with your customers. There is no facility limit or renegotiation, the only restriction is the credit worthiness if your customers.
Different providers all offer different solutions. Some remove the need to operate under their own PAYE, VAT and CIS but leave recruitment business owners as little more than consultants on commission in real terms, building the provider’s business, not their own. Some funders will not pay the full amount of an invoice, some will not deal with self-bill, just a few considerations to investigate.
Take the time to be sure you have found the right one for your business, a solution that meets all your needs and can support your growth ambitions.
Easypay are a recruitment specific funder and back office provider. We only deal with recruitment agencies. Our Managing Director and founder built her own agency from recession to £10 million turnover, so we understand the reality of your business.
Our team has over 45 years of experience in the recruitment sector. We have funded hundreds of millions of invoices over the 17 years we’ve been in business, and we’ve learnt the lessons you don’t need to learn first-hand. Let our experience support you to fulfil your growth ambitions.
If would like more information, please call our Client Care Manager, Shelagh Ward, on 01943 882104 or email email@example.com.