- 07 Jun
Recruiters Using Invoice Finance Have Less Late Payment Concerns
Recruiters that use invoice finance have fewer issues with customers paying late.
Recruiters And Late Payments
In our study of the attitudes of East Sussex & Kent based recruiters to late payments problems and the use of various finance options, we previously reported that 52% of the recruitment companies that we surveyed told us that they wanted to see late payments by customers improve.
Using Invoice Finance Linked To No Concerns Over Customers Paying
Further analysis of the results of our survey has revealed that of the 17% of recruiters that were using invoice finance, all of them said that they had no issues over customers paying late. There was a very clear split in the results:
- None of those that said they wanted late payments to improve were using invoice finance (invoice discounting or factoring), they were using some combination of their own money, family money a bank loan or a bank overdraft
- Of those that said they had no issues with customers paying late, over 35% of them were using invoice financing.
Use Of Receivables Financing
The use of these cash flow enhancing products is comparatively high in the recruitment sector but these results suggest that using receivables financing services goes hand-in-hand with not experiencing issues connected to customers taking extended credit. There may be several explanations for this. Firstly, receiving a prepayment against your invoices means that you don't have to wait around to get paid by debtors, before you can use the cash.
How These Services Help Recruiters
Typically, recruiters can use invoice financing services to release 85 to 95% of the value of their receivables when they raise their sales invoices. For a similar business that is not using such a service, their cash remains tied up in unpaid sales, until their customers decide to pay. This could be critical in overcoming the issues associated with delinquent debtors.
The second factor may be the additional services that are provided by the factors. In addition to add ons such as handling all the payroll administration, a credit control service is given to those that are using factoring. On average a professional outsourced credit control service tends to achieve a faster debt turn that a company handling the process in-house. The benefit of that service may also be reflected in these results.
Whatever the reason, there is a clear correlation between using receivables financing and not having worrys about customers paying on time.