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Cash flow is always a problem for recruitment agencies with many contractors on their books. Yes, everyone wants paying at the end of the working week (or month) often before payment has been received from the client. That's why Originem is offering recruitment business funding, also known as agency funding, through our Invoice Discounting service.
What is Invoice Discounting?
The simple explanation is it's a cost-effective way of keeping your contractors sweet. The more detailed explanation is that it's a form of short-term borrowing that allows your business to draw money against sales invoices before the client has paid. Meaning you can wave goodbye to irate contractors ringing up on payday and demanding to know where their hard-earned money is!
How does it work?
When your agency enters into an Invoice Discounting arrangement with Originem, we agree to allow you to borrow a percentage of your sales ledger, using the unpaid invoices as collateral. This is not a one-size-fits-all solution, so the percentage may differ depending on your circumstances, but a typical amount would be around 80%.
Then, as and when your clients pay their invoices, and new sales invoices are raised, the amount available to be advanced will change so that the maximum drawdown against sales ledger remains at the agreed percentage.
The result is less stressed contractors, less hassled payroll staff and a sales team who can get on with the business of recruiting without having to take time sorting out disgruntled freelancers.
Isn't that the same as debt factoring?
No, not when you look at the bigger picture. With debt factoring your business sells off its unpaid invoices at a discounted price. The finance company doing the buying is known as a factor and receives the debts in exchange for a cash injection into your business. In return, the factor collects the debts from the customers on behalf of the business to which the money was released'Debt factoring is just a fancy phrase for debt collection – not something that Originem would recommend to its recruitment agency partners, as it certainly isn't a good way to build solid relationships with clients!
Is Invoice Discounting for me?
Originem's Invoice Discounting service could offer real benefits for larger recruitment companies with established systems and an expected annual sales turnover of over £500,000. If that sounds like you, then get in touch.
If you would like to find out if your business could benefit from Invoice Discounting services, call our sales team today on 0161 713 1730.