Invoice funding is a critical tool in the recruitment industry. It enables smooth payments, can facilitate business growth and provides peace of mind when you know that your workers are all set to receive their payments safely and on time.

But if you choose the right partner, your invoice funder can add even more value. We asked our colleagues in the customer success team to share their wisdom, based on day to day work with our large accounts, helping them fund contractors and freelancers around the world. Here’s a summary of what they had to say:

 

The importance of qualitative conversations

As customer success managers, we see our role as bringing specialist knowledge, giving them the tools, insight and confidence to grow their business, overcome obstacles and maximise opportunities. we talk to them frequently; and together we look at market movements, working out how to push margins and increase revenues. We audit their performance from a technical perspective, running business models to see how things can be improved or streamlined.

These qualitative conversations and this continuous focus can lead to significant results, making a real difference to an account’s business success. So what have we learned over the hundreds, if not thousands of conversations our team have had with large recruiters? It’s all about growth and flexibility. When you’ve setup the right processes, your team and you will have peace of mind and the confidence to go out there and seize opportunities. Here’s what it boils down to:

Growing without constraint

Invoice funding (some call it invoice factoring) does go a long way in helping a business. Its main benefit is not only that that it allows you to have better cashflow, but very importantly the right solution can also offer levels of flexibility that are crucial for any organisation, particularly those who are growing fast or operating in very dynamic environments.

In our day to day experience, this flexibility translates as:

• A recruitment focused offer. Recruiters don’t want to be stifled by arbitrary limits or banking regulations that are designed to be ‘one size fits all’. Every industry has its unique requirements and what works for retail for example as a cashflow solution, may not work as well for recruitment. If you want true results, you shouldn’t have to bend your own processes to suit others, you should get something that is bespoke to your business. That’s why we’re seeing a shift in the market away from banks and traditional funders towards alternative payment providers.
• Accommodating limits. Companies are often faced with funders who fix limits early on, based on generic formulas that do not adapt easily or quickly enough to the needs of a growing recruitment firm. At Sonovate, we don’t set such restrictions, because we believe your ceiling should grow with you without the need for constant renegotiation. Because we work very closely with our customers, we are able to provide them with flexible funding at the pace they require.

Accessing cash at the ready, and when you need it

• Invoice funding, like any type of asset-based lending, is all about releasing cash. Recruitment firms, particularly the larger ones we work with, need visibility and confidence about their cashflow. When they place thousands of contractors, some of whom have to be paid weekly, others monthly and some in even more flexible ways, recruiters need to know that they will have the cash to do so without compromising in other areas of their business.
• As a rule, we advance up to 100% of the invoice value, while others in the market are more likely to advance partial amounts. By providing recruiters with all the cash they need to pay their contractors, we not only fund today’s business, keeping contractors paid and clients happy, but we are also fuelling the growth of tomorrow, freeing up working capital that would have otherwise been tied up in payroll.

Simplifying contracts and removing personal liability

• In the fast moving world of recruitment, complex long-term covenants can often (and quickly) become a major barrier to a company’s growth. People don’t like to be tied down by long term contracts or by complex admin work. Our customers are most comfortable when they are given clear and simple contracts. We offer ours on a rolling 90 days basis.
• Many funders require personal guarantees from directors, even when the type of funding that is on offer is asset based (in this case, your outstanding invoices are your assets). That’s why at Sonovate, we don’t require personal guarantees. Since we take the time to know our customers very well, we understand the strengths of their particular business, so we feel that imposing personal guarantees is unnecessarily restrictive.

Seizing opportunities when they come

• In the world of recruitment, exceptional expansion opportunities can sometimes arise from particular clients. For instance, if a client is expanding overseas and hiring talent in other countries, their recruitment partner can go with them, and leverage this opportunity to establish its own business in those markets. In this case, concentration limits, which many funders impose, become a hurdle. Sonovate’s founders were once recruiters themselves and have witnessed first-hand how international growth can transform a business. That’s why we don’t impose concentration limits: we don’t see concentrated business as a risk.

Planning for all events

• Credit, when not managed properly can be a double edged sword. Despite the best credit checks and credit control processes, there is always a risk that a debtor, in this case the end client, could default on their payments. Debt management and bad debt protection are therefore critical parts of any funding facility. To reduce the pressure on our customers and ourselves, we offer embedded bad debt protection including protracted default.

Leveraging best in class technology

In today’s world, you can’t say flexibility without saying technology. And by this, I don’t mean a standalone platform that a company can use to conduct a particular task, but a solution that will allow you to manage transactions and reporting across the multitude of packages that a typical finance organisation would need to run efficiently. One huge benefit of being industry experts is that our technology has been purpose-built around the needs of the recruitment market. It allows our customers to draw funds as and when they need them, but it also offers plug-ins through APIs to our customers’ other systems, whether it’s accounting software or CRM packages. For example, we offer seamless integration with Xero, which is a widely used accountancy package.

On a day-to-day basis such integrations mean automatic reconciliations, cutting down on paperwork and reducing the administrative burden on our customers’ teams. It reduces the risk of human errors and provides sound, meaningful Management Information at their fingertips.

At a strategic level, and to speed up credit control AML and compliance processes, we have access to the equivalent of Companies House in markets around the world, so we help our customers target specific markets and new clients who are already credit qualified. This can result in significant time savings as less energy is spent on chasing leads that later come to nothing because the end client does not have the right credit profile. We also offer a free instant funding decision tool that customers can use to gain confidence before taking on a new client or making a new placement.

Getting people paid is what it’s all about

Recruitment isn’t like manufacturing or retail. If a mistake is made, and cashflow is interrupted, people don’t get paid, livelihoods are compromised and families are affected. We don’t see your business as numbers on a computer, as we recognise the critical impact missed payments can have on personal circumstances, not to mention the damage they could do to our customers’ reputation.

We are not under any illusions. We know that there are many offers out there, but we are confident about how well we know our market and we believe we offer the best value. Whether it is operational leverage, market insight, customer selection or simply outsourcing your credit control or debt collection, we can provide a welcome extra pair of hands whenever you need them.

We live and breathe contractor recruitment and placement. We don’t do anything else. That’s why it pays to outsource your invoice funding to an industry expert.