Paying staff and candidate wages can be a challenge for growing labour hire and recruitment agencies. As the most important expense, wages need to be paid regularly and dependably.
Client revenues, unfortunately, aren’t always predictable – especially if you give clients 30 to 60 days to pay an invoice. Growing recruitment agencies can easily encounter problems as expenses get ahead of revenues.
One way to solve this problem is to use debtor finance. Debtor financing can improve your cash flow and provide funds to pay wages and other important expenses. To get an instant quote, fill out this form.
Which debtor finance option is right for you?
There are two debtor finance solutions that can help recruitment agencies. Both provide similar benefits but are suited towards different types of agencies.
- Invoice factoring: Available for smaller agencies. This solution finances individual invoices. It provides your company with funding, along with credit and collections services.
- Invoice discounting: Available for larger agencies. This solution finances invoices in batches rather than individually. It allows clients to perform their own credit and collections.
How does debtor financing help you?
Debtor financing allows you to finance slow-paying invoices. Instead of waiting up to eight weeks for payment, you get immediate funds to pay wages and other expenses. This funding allows you to focus on growing your company instead of chasing customer payments.
More importantly, debtor finance brings financial stability to the agency since your cash flow becomes predictable.
How does debtor finance work?
While invoice factoring and invoice discounting provide similar benefits, they operate differently. However, transactions are relatively simple.
Invoice factoring transactions finance individual invoices in two instalment payments. The first instalment is commonly referred to as the advance. It covers 80% – 90% of the value of the invoices. It is deposited to your account within a day of submitting the invoices. Transactions settle once your client pays the invoice in full. At that time, your company gets the remaining 10% – 20%, less the fee.
Invoice discounting lines finance your invoices as a batch and operate as a revolving line of financing. The line provides about 80% -90% of availability, based on the quality of your accounts receivable. The financing line is adjusted as your clients make payments and as you raise new invoices.
The advance percentage is one of the most important features of a debtor finance programme since it determines how much money you get as a first instalment. Our programmes provide high advances that start at 80% but can go higher based on your specific situation.
Get funding quickly
Your account can be set up quickly and you can usually receive your first funding in two weeks. Note that this time frame varies based on circumstances. Larger or more complex clients’ accounts may require additional time for set-up.
Subsequent invoices or batches can be usually be financed within a day or so or receiving them.
Use the credit of your clients to your advantage
One of the most important advantages of using a debtor finance solution is that it enables you to use the commercial credit of your clients to your advantage. Debtor financing companies consider the invoices from your creditworthy clients to be the most important collateral for the transaction. This transaction model benefits small companies whose only collateral may be a list of financially solid clients.
Get an instant quotation
We offer debtor finance to labour hire and recruitment agencies at competitive terms. To get an online quotation, fill out the enquiry form.
To learn more about our services, refer to the articles section. Selected articles include:
- What is Debtor Financing?
- What is Invoice Factoring?
- What is Invoice Discounting?
- Debtor Financing v. Overdrafts
- How is Invoice Factoring Different from Invoice Discounting?
We provide debtor financing and invoice factoring services to companies throughout Australia, including: