factoring for recruitment companies

Recruitment companies are one of the largest factoring industry sectors as the business is tailor made for factoring with invariably the companies having no other assets except debtors. Banks didn't have an appetite to fund fast growing recruitment companies satisfactorily even before the Brumark ruling in 2001 but since then they haven't even bothered to try and most recruitment companies look to factoring to fill this gap.

An interesting development in recent years is the added value that some factoring companies are offering recruitment companies in the form of a complete payroll and back office service in addition to the normal factoring finance as several are now offering a complete solution covering all aspects.

This shouldn't be confused with other companies that offer back office payroll services and tack on a rudimentary factoring type facility as not only are these companies comparatively expensive to use but they can be a little risky as often they obtain the funding by re-factoring the debts and if they have any sort of problems of their own with their factor this will trickle down the line.

To prove our point, last year a high profile payroll  / finance company went into Receivership and it was their factoring company that appointed the Receiver yet none of the clients were aware that their debts were being re-factored.

We believe that it is both pointless and risky using a company to handle both the backroom and funding aspects of the business if that same company are just outsourcing the funding to someone else. It is also the most expensive option available with typically charges of 5% of turnover being levied.

It would seem more logical to either factor the invoices directly with a factoring company that will also handle the payroll and back office functions or to keep the factoring and back office functions separate by firstly selecting the most appropriate factoring company and then outsourcing the payroll side to a specialist bureau or handling it in house (or use the services of your accountant) as either of these methods should be cheaper as well as less risky.

Typical costs for a recruitment company turning over £750,000 would be as follows and show how expensive the “All in one” route can be at almost double the cost of using a proper factoring company plus payroll specialist :-

It is an unfortunate fact of life that many factoring companies do not deliver the fast, flexible and personal service that they promise but as the UK's leading specialist factoring broker we know which ones actually deliver and we refuse to deal with the rest..

We also have relationships with back office companies so why not contact us for an informal chat as our services are free of charge and come with no obligation at all.

Factoring Invoices UK

5 Torridge, Hockley, Tamworth, Staffordshire B77 5QL
 
Tel: 01827 707680