As a contract recruiter, you charge out your contractors to an end client, who pays you for their work. You pay your contractors from the fee the client pays you.
It sounds pretty straightforward when we put it like that, but as many recruiters know it’s rarely that simple, because you’ll almost always have to pay your contractors before the client pays your fee.
Why cashflow can be an issue for recruiters
On average it takes 56 days for a client to pay a recruitment agency, while contractors will expect to be paid weekly, bi-weekly or monthly, and you will have to cover the gap between these differing payment terms with your own funds.
This can tie up money that could have been put to better use, particularly if you’re looking to expand. This issue can also worsen as you scale, because you have more contractors to pay, and more money invested in the “gap”.
Your clients also have cashflow to manage
Recruiters stand or fall based on their relationships, and it’s vital to maintain the relationships you have with your clients. If concerns about your cashflow are allowed to make their lives harder, you may find that you lose business to competitors based on the depth of their pockets.
Shortening payment terms, or even hassling clients when payments are late, are not viable options for most recruiters.
Your contractors need to be paid on time
At the same time, your contractors absolutely must be paid on time. Uncertainty about payments is one of the biggest causes of stress among contractors, and late payments can be disastrous in terms of engagement and morale. If your contractors quit, either to leave contracting or to work on alternative contracts, you’ll have no product - and no cash flow at all.
Why invoice financing isn’t the answer
With Invoice Finance, a factoring company will advance of part of your outstanding invoices and release the remaining amount once your client has paid. This kind of arrangement often comes with a range of conditions, including credit checks on your clients, the amount of business concentrated with any one client, or agreed funding limits for your agency.
This can still leave pressure on your cashflow, as the amount advanced isn’t necessarily connected to your wage bill, and the credit available doesn’t necessarily scale as you place more contractors.
How Orange Genie can help
Where your contractors are employed by Orange Genie Umbrella, we can arrange to pay them based on their timesheet, without waiting for payment from you, and you can pay us when you receive your fee from the end client. This fills the gap and protects your cash flow from late payment by the client. This service is more affordable than other sources of funding, like credit offered by your bank and because it’s automatically linked to the cost of the work your contractors are doing, it can scale seamlessly as your business grows.
For full terms and conditions, or to ask any questions you may have, please call our expert team on 01296 468 483 or email email@example.com