Invoice Finance is a popular way for recruitment agencies to fund their contract placements as it provides the funds needed to pay the candidates before the client makes payment. However, there are several different providers on the market, which can make finding the right provider with manageable daily processes and deadlines (and at the right price!) a minefield.
When an invoice finance company looks to provide funding, they will assess the risk of providing the funds and there are various factors which are taken into account. These can have an effect on the initial set up fees, the on-going pricing and the type of facility being offered to the agency.
A large number of the recruitment agencies using the TBOS Complete service have invoice finance arrangements set up and managed on a day-to-day basis by TBOS. Below are some of the ways that TBOS has helped those agencies to reduce the fees and charges on their facilities, whilst maintaining the highest level of funding possible:-
NO FRESH AIR INVOICING
The biggest risk to an invoice finance company is an agency that will raise a “fresh-air” invoice. This is a term that invoice finance companies use to describe an invoice for a placement that has not taken place, or for a timesheet which has not been authorised and therefore will not be paid. As TBOS deals with many different invoice finance companies and handles the back office for multiple agencies, we do not want to put our agency clients at risk or jeopardise the relationships with the invoice finance companies so we will always ensure that the timesheet has been approved before raising any invoice for funding.
SAME PROCESSES FOR EVERY AGENCY
When an invoice finance company assess the risk on a new arrangement, they have to be sure that the invoicing, credit control and accounting processes will not have a detrimental effect on the funding being provided. TBOS follows the same processes and provides the same reporting for all the agencies it manages which gives the invoice finance peace of mind that there is minimal risk with the funds being given.
MONTHLY MANAGEMENT REPORTING
One of the main ways for invoice finance companies to ensure that the funds are being used correctly and that the company is not at risk of “going under” is by providing management accounts on a regular basis. TBOS provides all of our agencies with monthly management accounts, which in turn are given to the invoice finance company to ensure that they are aware of how the agencies are performing month-on-month and can provide additional funding if required.
FULL CREDIT CONTROL HANDLED INTERNALLY
When an agency has an invoice finance arrangement, it will often be the invoice finance company that handles the credit control and chases all clients for owed funds. However, the invoice finance company have no incentive to collect the money in as they are charging interest on the funds borrowed (and often refactoring charges) and their processes are set to only chase the clients if/ when the invoices are overdue. TBOS manages the credit control of all the recruitment agencies on its books and is incentivised to collect in the funds as soon as possible, which enables the agencies to concentrate on growing instead being distracted by cash flow issues. TBOS also verifies within 7 days that all invoices raised are received, are correct and will be paid within terms to ensure the cash flow of the agencies is maintained.
INVOICE DISCOUNTING INSTEAD OF FACTORING
When a recruitment agency gets its first invoice finance arrangement, they will often be forced down the route of having a factoring arrangement instead of an invoice discounting facility. This is because the invoice finance company wants to reduce their risk by controlling the credit control and checking each individual invoice that is notified for funding. However, a factoring arrangement has a higher cost than an invoice discount facility as the invoice finance company has to employ staff to collect the funds and reconcile the payments in and out of the facility. As the invoice finance companies trust the processes of TBOS and the credit control is handled internally, the invoice finance company can provide invoice discounting facilities on day one which can greatly reduce the service costs straight away.
AUDITS HANDLED AT TBOS OFFICES
In order for the invoice finance company to ensure that the funds being provided are being used in the right way, they will often conduct audits at the client’s office to review invoices, credit notes and remittances. These can be distracting as the auditor has to understand the processes you follow and it can take 1-2 days to complete (depending on the size of the facility). As all of the audits are handled at the TBOS offices and the processes are the same for all agencies (and documented) this means that there is no distraction for the agency and they can be conducted quickly as our processes are proven, correct and fully compliant.
ARANGEMENTS WITH NUMEROUS FUNDING PROVIDERS
There are many different invoice finance providers for recruitment agencies and each have their own ways of assessing risk, providing and charging for funding and running the day-to-day operations of the facility. TBOS has strong relationships and work with many different invoice finance companies to not only provide comparative prices between multiple providers, but also to harness understanding of the capability of each facility.
Using TBOS to help set up and manage the invoice finance arrangements for our recruitment clients has helped ensure that they have all paid reduced fees and charges on their facilities. TBOS helps new start up agencies moving into the contract market to get their first invoice finance arrangement in place by handling all the set up and then the daily processes, meaning that the agency doesn’t get distracted from making those all-important placements. If a recruitment agency comes to TBOS that already have an invoice finance arrangement in place for us to manage, we will review this to see if the fees being charged and if the funding facility in place meets the agency’s needs. This may involve moving them from factoring to invoice discounting, renegotiating the rates with the current provider or even moving to an alternative provider if necessary.
TBOS have many case studies where they have helped recruitment agencies with their invoice finance needs so if you would like TBOS to provide a free, no-obligation review of your invoice finance arrangements or to see the pricing TBOS can achieve by looking after your back office and invoice finance needs, please contact our office.