How Easy Is It To Move From A Pay-And-Bill Solution To Your Own Invoice Finance Arrangement?

21 February 2023

There are many different ways that recruitment agencies can finance contract/temp placements with the two main avenues being using a Pay-And-Bill solution or arranging an invoice finance facility with a bank or factoring company.

Pay-And-Bill is where a company raises the client invoices based on timesheets submitted, pays the contractors (via PAYE or to Limited/Umbrella Companies) and distributes the profit minus the pay-and-bill charge to the agency the same week.

These services are very quick to set up and the charges are normally between 3-5% of the invoice value.  This service can provide instant cash flow to an agency as they receive the profit before the client makes payment but the charges can be expensive.

Invoice Finance comes in two possibilities, Factoring or Invoice Discount, which provide up-front funding to the agency bank account (normally between 75-90%) against the invoices raised to the client. Once the client makes payment to the invoice finance company account they will then release the remaining funding percentage.

These facilities are arranged by banks or factoring companies and are much cheaper than using a Pay-And-Bill facility.  However, the agency needs to have some element of back office to administer the facility and they can take 3-5 weeks to set up.

When a recruitment agency gets to around £500k-£1m of contract/temp turnover, it is advisable for them to consider moving to their own invoice finance arrangement as the cost savings can be significant and there may not be a requirement at that point to have the profit paid immediately.

It is best to get quotes from a few providers and compare the pricing to the current facility.  If there is a saving made then the next stage is to see what needs to be done to move the facility over.

This includes giving notice to the pay-and-bill providers and ensuring that the new provider can buy the debt from the Pay-And-Bill provider.  This may mean asking the Pay-And-Bill company to hold back some profit or holding back invoicing to be funded by the new provider.  This is to compensate for the fact that the Pay-And-Bill provider may be funding you more than the new provider can make available for you.

Workwell Outsourcing has transitioned many recruitment agencies that are using Pay-And-Bill solutions to their own invoice finance facility.  The savings have ranged from £10k-100k over 12 months and we have ensured that there is sufficient cash flow to ensure a smooth handover.

Contact Workwell Outsourcing For More Information

At Workwell Outsourcing, we provide effective support for recruitment agencies, including outsourced back-office administration, and recruitment invoice finance. To find out more, please call us today.

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