Are You Getting The Best Deal On Your Invoice Finance Arrangement?

TBOS helps set up and manages many invoice finance arrangements for its clients, working with a number of different invoice finance providers to ensure that our clients are getting the best service and deal on their facility. However, in our experience of taking on existing recruitment agency clients with their own invoice finance facilities, we have found that quite often the facility they have in place does not always meet their needs. Many lack services or have a number of hidden charges they were not aware of.

Invoice finance companies have always liked working with recruitment agencies as the invoices are always backed up with signed timesheets, which virtually guarantees payment. For this reason invoice finance companies are currently offering some really good deals which can still provide the funding required but at a much cheaper cost.

Here is a list of some of the things we have found over the years on different invoice finance arrangements that have not been a good deal for the recruitment agency:-

  • Additional Disbursement Fees
    TBOS have seen over the years that a large number of invoice finance companies have additional fees that they charge which are not mentioned within their main agreements. This could include fees for Audits, Currency Ledgers, Credit Limit Changes, letters confirming bank details, Trust Accounts and Annual Renewals. All of these fees can be negotiated on as they are additional fees to the invoice finance company and they should justify these costs to you before you agree they can take them. Some invoice finance companies will give you a cheaper rate knowing that they can make up the annual fees through disbursements.
  • Lack of Credit Control Process/Dunning Cycle
    If your agency currently has a factoring arrangement, do you know the Dunning Cycle that they use to chase your debtor book? TBOS have found that most invoice finance companies will only chase debts that are 7 days overdue and do very little verification beforehand to ensure the client has the invoice and it is correct. By moving to a CHOCCS (Customer Has Own Credit Control System) or invoice discounting, where the credit control is done internally, this could speed us the cash coming into the business and save you interest. It can even reduce your service charge if you can negotiate this. TBOS moved a client from Factoring to Invoice Discounting which reduced the client’s debtor days from 55 to 42 days within 6 months.
  • Overcharging on Banking Charges
    Due to the introduction of FASTERPAY a few years ago, which greatly reduced the charges for same day and next day transfers, a number of invoice finance companies have not yet got around to passing this saving onto their clients. We have seen some invoice finance companies charging up to £35 for a same day drawdowns compared to a £3 charge from the bank. Make sure you are aware of how much you are paying and speak to the invoice finance company if you are making lots of same day drawdowns.
  • Lack of Credit Insurance Protection
    Protecting your contract book debt is important for most agencies to ensure that, should a client go bust or not pay, they are not out of pocket. However most invoice finance companies only offer bad debt protection instead of full credit insurance. Bad debt protection only covers if the client goes bust, and does not pay out if a client does not pay for 120 days. Credit insurance however does offer this full cover, and most agencies do not realise that they only have bad debt protection when they sign up for this arrangement.
  • No Currency/International Capability
    Ensuring your business is future proofed is important. If you offer your clients the possibility of providing international contractors you must ensure that the invoice finance company can provide the funding in that country, and also support the currency. TBOS spoke to one invoice finance company who said they could fund European countries but only in Euros, which did not help our client who were billing in Swedish Kronas. TBOS also know of an invoice finance company who felt that arranging a Euro bank account would be too much work and time so suggested we work in sterling and suffer the currency losses.
  • Lack of clarity on Exit Fees
    When you sign up for an invoice finance arrangement you are often more concerned with the set up and ongoing costs. However, it is always advisable to ensure you understand the exit fees as these can be very expensive, even if you give the correct notice on your agreement. TBOS have seen an agreement where it said “an exit fee will be agreed” which meant the invoice finance company could charge what they liked should the arrangement finish, and it nearly ended up costing the agency thousands of pounds to exit.

TBOS has relationships with a number of different invoice finance providers and manages the day to day operations of a number of facilities to ensure the smooth running. TBOS helps its agencies to get the best possible deal on their facility and ensures that they provide the services they will need.

If you are looking for a new invoice finance arrangement, or if you would like to discuss your existing arrangement to ensure it is working best for you then please do not hesitate to contact the TBOS office.