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Factoring for the Recruitment Sector

The recruitment industry is one that is often beset with cash flow difficulties, and as such many recruitment firms could benefit from using invoice factoringSo, what can this branch of alternative finance do for employment agencies?

One of the most common reasons that recruitment agencies get into difficulties is because temporary employees need to be paid. If they’re not paid, this not only causes problems for the temp workers themselves but also for the client. As such, many recruitment agencies are left relying on overdrafts and survive on tight cash flow while trying to compete with large high street agencies with huge cash reserves. The worst scenario for a temp recruitment agency is that the client goes bust and they are left to foot the bill for the workers. This is why there needs to be enough cash within the business to cover client failures, which isn’t always easy. 

In order for a recruitment firm to succeed, it needs to have a highly efficient payment system, something that invoice finance can help with.

Cash flow solutions

Invoice finance can act as an excellent and affordable cash flow solution for any recruitment company that’s just starting up or is looking to grow. Factoring and invoice discounting are more accessible than bank lending for firms that deal on an invoice-basis and don’t require the years of financial history that banks often demand, making them suitable solutions for start up businesses.

If a recruitment agency uses invoice finance then it will be able to pay workers due to the injection of cash flow – factoring and invoice discounting unlocks up to 90% of the value of an invoice within 24hrs, with the remaining 10% released once the client has paid, minus a small lending fee. A factoring service also outsources debt collection and provides a complete back-office service which can add value for many small recruitment agencies.

Many recruitment agencies could benefit from using invoice factoring. If cash flow is a problem then help could be closer than you think.

 

 

 

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