Hard Hitting Truths about Traditional Invoice Financiers
Financing your contractors could be costing your agency more than you realise and can potentially lead to a lack of cash flow for your recruitment business.
When looking for a new funder, you might feel the headline figure you quoted is a good deal, but the reality could say something entirely different.
When it comes to finding the right invoice financier for your contract placements, the actual price tag is not only attached to direct costs but also to the profits it allows you to make and how you can use it to grow the bottom line.
In this period of economic uncertainty, The Herald highlights how late payments can cause major setbacks to SMEs. One of the solutions to avoid this is to get help from banks and traditional lenders who offer invoice financing services. If you run a recruitment agency and are already working with a funding facility, it is imperative to review your terms regularly. Here is our 30-second quiz to help you assess your current funding partner before deciding to switch to a new one.
Below are some of the reasons recruitment businesses consider switching their recruitment funding solutions. Also, have a look at how we differ when compared to other invoice finance agencies.
#1 Setting Up Can Be Costly
Traditional funders often charge fees at each step of the funding process. In addition to having to agree to run a minimum amount of business through your financier, you often find yourself paying for:
- Setup fees
- Service fees
- Exit fees
There could also be additional costs that impact your margins:
- Re-factoring fees
- Interest on the money advanced
- Reviewing, renewing, or increasing your funding
With Sonovate there are no set-up fees, no service fees, and no audit fees. 95% bad debt protection is included in our pricing as standard and there are no hidden costs such as credit check fees, annual renewal premiums or credit limit fees.
Also, we do not place a concentration limit on you.
Book a demo to see how we can unlock cashflow opportunities for your recruitment business.
#2 The Business Invoice Finance Process is NEVER Straightforward!
When it comes to finance agreements, it’s important to keep things straightforward and easy to understand. While some funders may have additional requirements to mitigate financial risks, it doesn’t have to be an overwhelming process filled with legal jargon and endless paperwork.
You could be asked to craft a comprehensive business plan that can take several weeks to complete. In addition, some funders may require a series of credit checks which may be tied to you personally as the agency’s representative.
All-in-all, it can take four to six weeks on average to secure a funding facility.
This is where our specialists at Sonovate can guide you, to get your account with us going with no set-up fees or personal guarantees required. We help to optimise your cash flow by funding up to 100% of your invoice values.
Request a call-back with our team of recruitment experts to know more.
#3 Funding is Conditional
Traditional financiers are limited by outdated ideas of risk.
It is why the majority will demand that the money they advance is spread across several clients and not overly concentrated with any one business.
They see it as a risk! You are essentially being penalised for having a trusted client that is a reliable source of business for you.
You can also expect to see caps on the amount that your financier may provide, along with other conditions drawn from your business plan.
Things are different with Sonovate. Our integrated easy-to-use platform helps you to receive up to 100% of your unpaid invoices in less than 24hrs. We do not have conditional funding- and that is another reason we differ from traditional invoice financiers.
We offer invoice finance solutions to agencies of all sizes, from large businesses to mid-size and small recruitment agencies. Read this success story about how we helped to boost the growth of recruitment startups with flexible recruitment funding and back-office solutions. Our data shows that agencies who have us as their first funder grow 3 times faster than average.
#4 It is difficult to leave
Invoice financing companies that require long-term contracts and impose penalties for the early termination may be signalling a lack of confidence in the quality of their service. These traditional invoice factoring services often compel recruitment agencies to remain with them by enforcing extended contract terms and significant penalties for leaving before the contract ends.
You could also be charged to renew, review, or increase the size of your funding.
At Sonovate, things are different! We do not tie you to long, complex contracts that could make it difficult for you to change financiers or leave the relationship if you see opportunities elsewhere. Our process is a simple, ‘pay as you go’ service, there is no minimum contract. Simply log in and use our platform as and when you’d like to
If you are planning to renew your contract with your existing invoice finance company or new invoice finance solutions, here is our detailed guide to help you.
#5 The tech is cumbersome
The process of managing contractors can be cumbersome and time-consuming for recruitment agencies. It is often the reason why some of them avoid moving into the contract market at all, losing out on this lucrative business. That, or they are forced to hire a back-office team to manage any significant growth.
Traditional invoice finance facilities and tech have never gelled well together which is why an entire industry was born from the marriage of the two. It is Fintech!
Modern business invoice finance backed by industry-leading tech gives agencies an enormous advantage. It removes the headache of:
- Credit control
The reality is that most financing providers have extremely limited tech and are forced to use third parties, which can make your processes very cumbersome.
Embedded payment solutions platform: Our tech platform offers everything you need to get started. Our powerful APIs help us to integrate with your existing tech stack to build bespoke solutions- from onboarding to credit risk management, funding, and payments. As the only financier to combine tech, invoice finance, in-house timesheets, and an integrated app, we have changed the game for agencies that place contractors.
#6 Poor Customer Relationships
Many traditional invoice factoring services offer poor customer service that could lead to mistakes in billing. If an invoice financing company charges its customers incorrectly, it can result in overpayments or underpayments, which can impact the customer’s cash flow and financial stability.
Also, customers are often unable to get in touch with a funder’s customer support team quickly obtain the support they need. This can cause frustration and anxiety when you need help with your financing and may impact your ability to manage your business operations effectively.
Furthermore, if an invoice financing company fails to report timely payments or has incorrect reporting, it can negatively impact the credit scores of its customers, reducing your ability to obtain financing in the future and can lead to higher interest rates or unfavourable terms.
How are things different at Sonovate?
Thankfully, things are not like that here at Sonovate! Our focus is on providing a seamless and positive customer experience. So, we ensure that the entire process of invoice financing is transparent and streamlined to suit your business requirements. We have implemented various tools to collect customer feedback and we focus on every step of your funding process, starting from your onboarding journey.
At the end of the day, we understand that customer satisfaction is the key to our success. That’s why we invest in innovative technology, integrate with top accounting systems, and constantly seek feedback to improve our platform and service. We also have dedicated teams for Customers Success, Operations and Customer Experience to ensure you stay well-informed at every step of the funding process with us.
The Sonovate platform
Sonovate is an invoice platform designed to reduce admin, save time, and let you focus on growing your recruitment business. Choose from a funding and recruitment back-office platform for an all-in-one solution, or just funding to complement existing systems. Giving you flexibility when you need it, or growth engines when the time is right.
Book a short demo with our team at a time that suits you to find out how Sonovate can help your business grow.