“Your Invoice Finance Company Said What?!”

TBOS speaks to many recruitment agencies on a daily basis and some will already have their invoice finance arrangements in place.  Due to TBOS’ experience with many different funding providers and helping to set up invoice finance arrangements for many recruitment agencies, it is easy for us to ensure that the facility is meeting the agency’s needs.  However, over the years TBOS has come across some scandalous arrangements and massive overcharging or underfunding in place.

Below are a number of statements we have heard from clients who have come to TBOS with existing invoice finance arrangements which have not suited their company needs:-

“I WAS CHARGED £6,000 LAST YEAR ON RE-FACTORING CHARGES”

Refactoring charges are archaic charges that some invoice finance companies still decide to charge when an invoice goes over the funding period.  Not only do they charge this but the invoice finance company also takes away the funding so you are hit twice.  The double whammy on these charges is that often the invoice finance company is often credit controlling the debts which means that they are the cause of the charges in the first place.  TBOS works only with invoice finance companies who do not charge refactoring charges.

“I AM BEING CHARGED 7% OF TURNOVER AS A SERVICE CHARGE”

The service charges on each invoice are dependent on a number of factors (projected turnover, client list, sector, concentration, etc.), but to an inexperienced director these costs are an unknown.  TBOS has lots of experience of different size recruitment agencies so knows the differences in charges and the maximum that should be charged and 2.5% is the highest rate we have ever seen on a very low turnover agency.  It is also advisable for an agency to get numerous quotes when getting an invoice finance arrangement.

“I RAISE EURO INVOICES BUT ONLY HAVE A STERLING LEDGER”
Not all invoice finance companies can provide funding on international currency invoices so when you set up an arrangement it is advisable to ensure this is possible if there is a future chance of making overseas placements. Should this be the case it is best to ensure that any currency invoices are funded in the same currency to avoid any exchange losses.  We worked with a previous agency whose invoice finance company wouldn’t set up a Euro ledger (due to time and costs) and ended up costing the agency over £250 in exchange losses.

“I HAVE BEEN ON THE SAME RATES FOR THE PAST 2 YEARS”

Reviewing your invoice finance arrangements each year is important to ensure that you are getting the best possible rate as not all invoice finance companies will not notify you of potential cost reductions.  At TBOS we constantly review the invoice finance arrangements especially as turnovers increase to ensure the rates are correct.  One agency who joined TBOS was reviewed and we managed to save over £50k per annum on their invoice finance costs by moving to an alternative provider after not being reviewed for 2 years.

“I AM BEING RESTRICTED FUNDING ON MY CLIENTS, CAUSING ME TO PAY OVERCHARGE FEES”
Some invoice finance companies target their sales team on not just the service charges on invoices but any additional disbursement fees that can be charged. If a company is not performing to the levels expected the invoice finance company will look at other ways to make up the income.  One of the ways one of our agencies experienced was an invoice finance company restricting the funding on certain clients (blamed on credit limits and concentration) that caused the agency to have to ask for advances which caused excessive advance fees in order for the agency to pay their contractors.  This meant that out of a possible 85% available they were never getting more than 55% funding.

“I PROVIDE CONTRACTORS TO A PUBLIC SECTOR AND I HAVE BAD DEBT PROTECTION”
Bad Debt Protection is a form of credit insurance provided by some invoice finance companies to ensure that if the client went bust then the clients (if covered by a credit limit) will be insured with no loss to the agency. However some invoice finance companies will not give the moral advice to clients to advise them that as they are dealing with clients in the public sector (NHS, schools, HMRC, councils, etc.) that these industries should not require bad debt protection.

“I AM NOT BEING FUNDED FULLY ON THE SAME BANK I AM FUNDING WITH”
This was one of the most controversial reasons for not getting funding on a client and following a conversation with their account manager allowed this to be resolved within a matter of hours. This mainstream bank was one of the clients the agency was invoicing, but due to their ridiculous PO number system and poor payment process this had meant that this client moved beyond the funding period.  The account manager called the accounts payable department and got the invoices fast tracked for payment as it was an embarrassing situation to not be funding on themselves.

TBOS works with a number of recommended invoice finance providers who give preferential rates to our agencies due to the simplification of the invoicing, credit control and accounting processes.  TBOS also ensures that any additional charges are kept to a minimum or any disbursements are waivered due to our relationship with our providers.  This includes no audit fees, no refactoring charges and reduced same day drawdown fees along with all credit control being handled by TBOS staff to further reduce service charges and interest fees.

For more ways on how TBOS can review your existing invoice finance arrangement please contact our office