Controlling the cash flow of any temp staffing agency can prove a challenge at times, with the obligation to often pay workers weekly while clients work to 30 day credit terms. Insufficient funds can mean quickly the growth of a business can be impacted and ultimately put the overall business survival at risk.
So what is a viable option to ensure cash flow is managed correctly, and agency longevity ensured?
Introducing invoice finance
The concept for invoice finance is quite simple. Rather than having to wait weeks for your invoices to be settled by your customers, a lender uses an outstanding invoice as funding security, giving you quick access to a large portion of that invoice almost immediately.
You can borrow up to 90% of the invoice value usually. The lending company will handle your sales ledger and collect due payments for you - removing the cost of the finance service itself - before paying you the remaining balance.
A straight forward process - from initial dealings to weekly trading
Cash flow - one of the biggest advantages to an invoice financing facility is the improvement it can make to your available funds, putting you in a better situation to cover expenses as they occur or maximise opportunities as they arise
Funds accessed quickly - they can often be released within 24 hours of it being available to a customer
Flexibility of facility - the amount you can borrow increases as your earnings do, allowing you to access more funds than through a more traditional loan or bank overdraft
Qualifying ease - for most companies without financial issues or unfavourable credit history, invoice finance is fairly straightforward to be eligible for
No security issues - in many cases the invoice alone is the only security that is needed, you won’t have to offer up physical assets from your company and customer creditworthiness is in the hands of the lender
Credit control services are managed on your behalf by the lender - so instead of chasing late-paying customers, your time is freed up to focus on growing your business
Ability to extend payment terms - having the flexibility to alter payment terms when needed, to meet industry standards or customer expectations can be a real bonus
Invoice financing allows temp agencies to improve their cash flow, pay employees and suppliers promptly, plus reinvest in operations and growth earlier than they perhaps could have done, if they had to wait until their customers settled their invoices. SME and start-up agencies particularly can enjoy quicker expansion and development in a much shorter time frame.