Why Recruiters Stick to Certain Financial Habits
Despite widespread dissatisfaction with banks and other financial institutions, people are often reluctant to change their invoice factoring providers. In the hyper-competitive world of recruitment, invoice factoring is a misunderstood yet potentially game-changing financial strategy.
The Double-Edged Sword: Understanding Invoice Factoring
Let's get straight to the point. Turnover is impressive, profit is essential, but cash flow is your business's lifeblood. Especially in recruitment, you often have to wait an excruciating 2 months between paying your contractors and receiving payment from clients. Invoice factoring can bridge that gap by advancing a percentage of those outstanding invoices.
The Risks: When Invoice Factoring Goes Wrong
With traditional financiers, you may find yourself tied to rigid contracts and hefty exit fees. You often receive only 60%-80% of your invoices upfront. The remainder, which you receive only after your client pays the financier, can significantly hamper your cash flow, affecting your ability to cover overheads and grow.
The Fine Print: Contractual Limitations
Traditional financiers often impose concentration restrictions. So, if you have a large volume of business with a single client, your financier might see that as a risk and restrict your funding accordingly.
Hidden Costs: The Details You Didn't See Coming
Traditional invoice factoring comes with a variety of hidden costs—setup fees, re-factoring fees, late payment penalties, and more. These can add up quickly, eroding your bottom line.
The Way Forward: What Are Your Options?
If you're looking to scale your recruitment agency, you need a more flexible, transparent invoice factoring provider. To place more contractors and grow your business, you need a financier that aligns with your cash flow needs and business model.
For those seeking more detailed information on how to choose the right invoice factoring provider, be sure to download our guide that contains a list of:
- Questions to ask potential providers
- Key terms and conditions to look out for
- A comparison table to evaluate different providers
- A list of hidden fees to watch for