Pay-And-Bill Companies – What Should You Be Asking?

When making contract or temporary placements, there is often a requirement for an agency to have additional funding and administration processes to ensure the candidates are paid correctly and on time, every time.  There are many different ways of funding and processing these types of placements and one method is by using a Pay-And-Bill provider.  A Pay-And-Bill provider will deliver administration and funding for recruitment agencies and in turn will often charge a percentage of turnover, whilst releasing profit early.

Below is a list of some of the questions you should ask a Pay-And-Bill provider before engaging their services to ensure that their solution meets your needs:-

HOW DO THE CHARGES WORK?
Pay-And-Bill companies charge in different ways but often will work in the principal of charging on a percentage of the invoice value. This may be on the NET invoice amount rather than Gross, which can change the fees charged by 20%.  They may also reduce their fee percentage based on the level of invoicing raised each week on a sliding scale.

WHEN DO THE CONTRACTORS GET PAID?
Ensuring the contractors are paid on time is vital and is really the main reason for using a Pay-And-Bill arrangement. Understanding what information and documentation is required to get a candidate paid is important and if there any restrictions then these need to be known immediately.

WHEN DOES THE PROFIT GET PAID?
Most Pay-And-Bill companies will pay profits based on when the candidates are paid, whether that is on a weekly or monthly basis. Understanding when and how your agency will be paid is important and what documentation will be provided so that your accountant can account for these figures within your books, and prepare for the VAT impact of these profits.

WHAT HAPPENS IF THE CLIENT DOESN’T PAY?
Pay-And-Bill arrangements work when the clients being invoiced pay the invoices raised on time. However, it is important to understand what happens should a client not make payment or go bust.  Will the candidate still be paid?  How will the Pay-And-Bill company recoup the funds?  Will they take this from future profits or expect the funds to be repaid immediately?  Is there any insurance to cover these eventualities?  These are important questions to ask before you engage a Pay-And-Bill service.

IS IT REALLY 100% FUNDING?
Many Pay-And-Bill providers will say they provide 100% funding but you need to question if this is correct. Even though they provide the funding on the contractors pay and the profit to the agency, they will also hold back the VAT, PAYE and holiday pay which doesn’t need to be paid immediately.  These funds will be held by the Pay-And-Bill company instead of the agencies account which could have aided cash-flow if done through an invoice finance arrangement instead.

ARE THERE RESTRICTIONS ON PAYMENT TERMS?

Whilst most clients will work on 7-30 days payment term arrangement, it is important to know whether the Pay-And-Bill company can support your placements if the terms are 45, 60 or even 90 day terms.  Understanding if there are any restrictions on clients you are or may be dealing with is important before you are tied into a funding arrangement.

WHAT HAPPENS IF MY CONTRACTOR SUBMITS THEIR TIMESHEET LATE?
Many Pay-And-Bill companies work on a timetable system where timesheets need to be uploaded each week on a deadline in order to get the candidate paid by the Friday. However you need to know what happens if the candidate misses the timesheet deadline but still needs to be paid.  Is there an additional charge?  What process needs to be followed?

WHAT ADMIN WORK DOES THE AGENCY NEED TO DO TO GET THE CANDIDATE PAID?

The processes followed by Pay-And-Bill companies vary from company to company, some will have online timesheet portals whilst some will expect the agencies to collate the timesheets each week and provide this data to the Pay-And-Bill company.  This method can take valuable sales time away from the agency as they are occupied with chasing timesheets and uploading reports each week.

HOW WILL YOU REPRESENT MY AGENCY TO MY CLIENTS?
Using a Pay-And-Bill provider will put part of your agency identity in the hands of another company and ensuring you know how this will be presented to your clients and candidates is important. Will the invoices be on your headed paper?  Will the credit control be in your agency name?  Will the clients and candidates receive emails from another company?

Pay-And-Bill providers can prove to be a very useful solution, especially for low level temporary placements or agencies with a low number of contractor placements.  This is mainly due to the fees being based on turnover and the flexibility over the amount being funded.  However, once the agency gets to a large number of placements or if they are billing higher value invoices, it may be time to consider using invoice finance arrangement instead to fund the placements.

TBOS helps many agencies of various sizes to fund and administer their contract placements on a daily basis.  TBOS Freedom works differently to a Pay-And-Bill provider, but does help provide funding and administration services to individual contract placements.  TBOS Complete supports the agency once the level of temporary or contract placements gets to around £500k turnover per annum, by helping to set up invoice finance and then running this facility along with the administration of invoicing and payments to the contractors.

For more information on how TBOS can help you fund and administer your contract placements, please contact our office.