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Five questions recruitment agencies need to ask before renewing their finance facility

Everybody avoids the nitty-gritty details of invoice finance until they have to. And then they just wish there was a TED talk out there that had all the answers!

Agencies are too often saddled with unsuitable finance, because they don’t actually know what a better offer looks like.

The rest of the recruitment industry has “managed” for the last thirty years or so by going down the same avenue. However, just because something works, doesn’t mean it couldn’t be done better. Now is as good a time as any to review your current finance facility and decide whether it’s the right fit for your recruitment business.

To help you do this, we’ve shared five questions you should ask yourself to decide whether your finance facility is helping or hindering you.


1. What does your finance facility actually cost you?

Bear in mind that the low service charge financiers often wave in your face, will mask a financial reality that looks entirely different.

  • Is the amount you can drawdown against your invoices restricted? If it is, why and how is this going to impact the cash flow you need to scale your book?
  • Does it limit the amount you can fund through a single client, regardless of them being your biggest cash cow?
  • Are the minimum thresholds you need to meet beyond what you’re placing?
  • Will you have to pay a renewal fee to extend your contract?
  • Do you need to pay to increase your funding facility and do you have control over the amount it’s increased by?


2. What would you improve?

Consider all the setbacks and problems that were born from a difficulty with your financier, then think of all that could have been achieved if they hadn’t been there.

If you were advanced all the profit from your invoices immediately, think of the financial headroom you’d have to grow, invest, and place more contractors.

Is the credit control and processing behind the scenes up-to-scratch? Could you be making more money if you didn’t need to dedicate time to admin?

Are the communications your financier has with your clients damaging your business relationships?


3. Is there a better offer?

Whether it’s squeezing the missing information from a brief or seeing through the tall tales of candidates, recruiters tend to pride themselves on their ability to sniff out a good deal.

Yet, when it comes to their own agency and one of the most important decisions they’ll make with it – its finance, they tend to accept what they’re given.

It’s business acumen to shop around for the best deal. You wouldn’t place a contractor without knowing the market so before you commit to a lengthy contract, see how it measures up.


4. Do they offer you the full package?

Could your current finance facility provider be giving you more?

As well as the finance they provide, it is worth considering how else they support your business. So, with this in mind, you should ask yourself the following:

  • Does your provider also give you back office technology?
    • Do they have a platform you can use to manage your placements?
    • Does their tech offering streamline the manual process of running contractors?
    • Can you sync your CRM with the back office platform?
    • Do they give you an all-in-one solution?
    • Can you access the platform wherever you are?
    • Do you have to pay more to take advantage of their tech offering?
  • Does your provider also offer dedicated support?
    • Do you have a dedicated point of contact at your provider?
    • Do they offer you good customer support?
    • Are they truly helpful when you have any problems?
    • How quickly do they resolve any issues?
    • How good is their communication?
    • Do you have to pay more to receive support from them?

If your current provider only gives you finance, you should seriously considering making the move to another financier. Especially considering the amount of money you have to pay to use them!


5. What would it cost to leave?

Financiers have a habit of bolting the door shut once you’ve signed, which is why you need to clarify the exit terms before you sign.

They might forget to mention that there’s a three-month notice period that needs to be given, and during this limbo they’ll withhold your margin.

Bear in mind that there are ways around this if you want to transfer to another financier and it’s not a reason to stifle your agency with the wrong service.

When it comes to choosing your financier, “It works” doesn’t cut it in a competitive landscape. So before you tie yourself into a year-long contract, ask who Sonovate are.


This article was originally published on Dec 2, 2016 and updated Mar 22, 2018

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