When it comes to running a business, having access to working capital is paramount. Invoice finance is an ideal way to help your business succeed.  

Many businesses turn to invoice finance providers to help keep their cash flow going. Choosing the wrong provider can be detrimental to your business, leading to higher costs, increased debt, and decreased working capital. 

However, with all the jargon, terms and conditions and overwhelming sales pitches thrown at you, it can be hard to know whether an invoice finance provider is the best fit – and you might end up with one who is doing more harm than good. Whilst you assess whether to renew your contract with your existing invoice financier or decide to switch, why not have a look at how Sonovate compares. 

Here are some points to look out for to help you assess whether your invoice finance provider is harming your business. 

#1 You are not getting all your cash flow 

When choosing an invoice finance provider, keep in mind what percentage your provider keeps and how that could affect your margins and bottom line.    

For your cash flow, it is also important to understand whether your funder provides a significant portion of the invoice value. Many invoice finance providers only give you 60-90% of your invoice value in advance. This could cause your agency to potentially lose profits and could impact your contractor relationships if they are not paid on time and in full.   

We understand how recruitment agencies could suffer from cash flow issues and eventually fail to pay workers on time.  Sonovate offers a global fintech platform that can help you have access to cash, save time and resources, and let you focus on growing your business. 

Get Started with Sonovate to know how we can scale your business.  

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#2 Poor customer service  

Poor customer service from an invoice finance provider can harm your business by causing long wait times, unresponsiveness, and delays in processing invoices. This is especially true if their customer service teams are hard to reach and slow to respond to your needs and concerns. 

#3 Your invoice finance provider charges interest on late invoices 

Late payments happen – it is a reality in the industry. However, if it is not the fault of your business, why should you be penalized for it? 

If your invoice finance provider charges you interest for late invoices, you could be losing out on a lot of cash. This could have been invested in growing your business by placing more contractors, getting new technology, doing more marketing or using in other ways to stay ahead of your competition.  

Read our expert blog on why you should choose an industry expert to fund your invoices to know more.  

#4 Slow Payment Processing 

Lengthy payment processing times can cause a delay in funding, leading to cash flow issues that might affect your ability to meet financial obligations, and ultimately harm your business. Without timely incoming payments, you may struggle to cover expenses and make necessary investments.  

#5 All turnover agreement 

If your invoice finance provider insists on having an all-turnover agreement in place, they are instantly forcing restrictions on your business. 

You would have no flexibility to decide which of your clients to fund through your provider, so you wouldn’t have full control over your own business. And, if one of your clients fails to pay, the funds you have to work with other clients may be reduced. 

#6 Limited flexibility 

Some invoice finance providers have strict requirements for the types of invoices they will finance. For example, they may only finance invoices that are due within a certain timeframe.  

If you have invoices that fall outside of these parameters, you may be unable to access the financing you need to run your business. 

Worried about how to optimise your business cash flow? Or scaling your operations globally? We can help you out!

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#7 Concentration restrictions 

Something we at Sonovate, find puzzling is why an invoice finance provider would want to restrict the amount of business you can do with your clients. 

It means you cannot grow at organic speed with your large accounts. It might cause you to lose a big client or at least share of wallet with that client if you are not allowed to place the number of contractors they need. And, if you want to review your finances, you might be expected to pay additional fees. 

#8 Renewal fees 

You would think that, when your contract is coming to an end, your invoice finance provider would do anything to prevent you from moving to one of their competitors. 

But sadly, with a lot of providers, this isn’t the case at all. Instead, they charge renewal fees – so you must pay to continue giving them your money! 

#9 Reserves 

In invoice funding or factoring, “reserves” refer to a portion of the invoice value that the factoring company withholds as a form of security. It is usually a percentage of the total invoice amount and is held by the funder until the customer pays the invoice in full. Once the invoice is paid, the factor releases the reserve back to the client, minus any fees or charges.  

These reserves could just be another pain – they can hold back your business, retain your profit and stop you from moving forward. 

What’s more, reserves can impact your cashflow and forecasting, as the amount reserved is often not made obvious at the start. 

Get in touch with Sonovate to understand how we can optimise your business cash flow and help your business to scale globally.   

#10 Lack of Security 

Some invoice finance providers lack adequate security measures to protect your financial information and invoices. This can leave you vulnerable to fraud and identity theft and can compromise the security of your business. 

Invoice financing involves sharing sensitive financial information, and it’s important that your invoice financer has adequate security measures in place to protect your data.  

At Sonovate, our financial crime experts constantly monitor trends to help keep our business and that of our customers safe from fraud and scams, read more here in our blog on fraud prevention in recruitment and consulting.

#11 Other hidden fees 

We are not done with fees quite yet. 

As well as all the fees and extra charges we have already mentioned, your invoice factoring provider might also expect you to pay: 

  • Service fees
  • Bad debt protection 
  • Interest 
  • Audit charge 
  • Refactoring cost 

#12 Not industry experts 

It is more than likely that your invoice finance provider is not an industry expert. 

They don’t understand the intricacies of recruitment or consulting, they have just adapted their standard model to accommodate your business. 

And, because they don’t understand how you work or what your needs are, they aren’t going to provide you with the flexibility you need to succeed. 

#13 Unwillingness to Adapt 

If you operate in a specific sector, market dynamics can change and that means that, at some point, your contract will need to change to account for these changes. However, many invoice finance providers are unwilling to adjust their contracts when that happens. That can be a serious problem for you, and your business, for example if you rely on installment financing to get by.  

We’re different from most invoice finance providers – we don’t have any extra charges, restrictions or additional fees in place, and we’re dedicated to helping your business grow. Read our comprehensive guide on switching your invoice finance facility before renewing your existing contract or switching to a new one.  

Our platform: How can we help to scale?  

Sonovate provides tech-driven finance and workflow solutions to recruitment agencies, online labour marketplaces, consultancies, and other businesses that engage contractors and freelancers.  Our platform is designed to reduce admin, save time, and let you focus on growing your business. Choose from a funding and back office platform for an all-in-one solution, or just invoice finance to complement existing systems and give you flexibility as and when you need it.   


 This is an updated version of the blog which was originally published here