- 25 Nov
Payroll Finance Against Invoices to Cohesion
Recruitment companies often need payroll support. This can include both payroll management and funding against their invoices to help them meet their payroll obligations. This finance bridges the gap between having to pay temporary staff and getting paid by your customers and is common in the staffing sector.
In a recent case, we were able to find payroll finance against invoices to Cohesion for a prospect that had outgrown their existing payroll funder.
Payroll Finance Against Invoices To Cohesion
Our prospect came to us because they had outgrown their existing invoice finance company. They needed a bigger facility as they were expanding, and they also had concentration problems with their main debtor. This is called a "prime debtor" situation, where the sales ledger is concentrated on a single customer. In this case, the customer was an RPO organisation called Cohesion.
The problem was that the incumbent finance company were restricting funding against this prime debtor, adversely affecting our client's cash flow and working capital position.
RPO Neutral Vendors
RPOs (Recruitment Process Outsourcing companies also called neutral vendors) are intermediary organisations that take care of all the temporary staff recruitment for large companies. This removes the need for a large purchaser of temporary labour to deal with multiple smaller staff agencies. However, as with this case, it can mean that a small recruitment agency finds that their sales are concentrated into one particular RPO.
A large volume of placements through one organisation may sound like it makes sense from a workload perspective, however, it can cause funding restrictions if you use invoice finance.
Increasing Funding Levels Against Prime Debtors
We were able to find our client a replacement payroll finance service with an independent invoice finance company. They were able to offer both the larger facility size our client needed, and more liberal funding against the main debtor. In fact, our funding partner was able to double the level of funding against the Cohesion invoices. This will release more cash for this client to use for things like their staff payroll.
More information about Recruitment Invoice Finance.