Managing cashflow is essential to the success of any business, particularly in recruitment agencies and especially when payroll commitments dictate they pay recruitment staff before clients have paid their invoices.
Invoice financing is a great short-term way to plug the gap between invoice payments and provides you with ongoing access to money for growth. When your financing runs smoothly and efficiently, you and your business can look forward to benefits such as improved cash flow and better working capital. By using your chosen financers in-house credit control process as well, you will spend less time chasing your clients and have more time to focus on your business.
Here’s our tips on how you can ensure your invoice financing runs smoothly:
Provide on time and accurate timesheets
If you don’t keep track of how many hours your workers have worked, how will you know how much to invoice your clients for?
Whatever process you use for collecting timesheets, whether that’s via a third-party software, excel sheets, or even paper time sheets, you need hours accurately inputted and signed off after each shift - accurate/ signed off time sheets ultimately provide evidence for any potential litigation regarding wage and invoice disputes. Failure to do this can cause a delay in the processing of workers hours/pay, risk clients getting invoiced for too much/ too little, workers sick pay potentially being missed and so on.
If you primarily use paper timesheets, consider migrating to a back-office software, one that allows you to input hours digitally and clients to go in and approve completed timesheets. With paper timesheets the margin for human error is greater as paper timesheets can be more difficult to read and easier to miss sections off of, when filling them out – an electronic system will pick up on data errors and alert you before its too late ensuring your data and payroll is as accurate as possible.
Credit check your clients before supplying to them
Carrying out the right due diligence is very important when taking on and supplying to a new customer.
Doing your own research such as checking their financial history on Companies House and commissioning a credit check by a 3rd party provider, will quickly inform you whether the company has good credit and can be a good customer.
If you work with a payroll management company, or alongside your financier’s in-house credit team, they usually will offer a credit check and the appropriate due diligence as part of their service. Just be sure to inform their teams of your plans to work with a new customer to ensure they are creditworthy before you begin.
Get your invoices paid on time
This is very important for any business, the main reason being that this helps with your cashflow and depending on your arrangement, your financer may chase the invoice for you. However, you still need to invoice the client and hand over the details of the invoice to your financer.
For your invoice to get paid on time, you should make sure the that you have done everything your side to get the invoice out correctly and on time to the client. By agreeing clear payment terms, making your invoice accurate and easy to understand, including the correct bank details, and by sending the invoice to the correct person in the business will all help improve your chances of getting your invoice paid on time.
Choose an invoice financing solution that has credit insurance
Having credit protection, also known as bad debt protection, can help you operate safe in the knowledge that you still get paid if a customer should become insolvent or are unable to pay the invoices they owe.
Most funders will have credit insurance included within their service, or as an add on for a fee, it’s always best to check when signing up with them first and discuss any additional cost you may receive.