Avoid the Pitfalls in Recruitment by Factoring

When it comes to the labour market there are many opportunities for companies that can provide the staff a business might need on a temporary, contract or permanent basis. There are a few pitfalls as well that you need to consider. Plenty of people who are in full time employment also register with a recruitment agency just in case a better opportunity comes along. There are unemployed people who do likewise believing that a privately run company with contacts is more likely to find them new employment than the government exchanges.

Some others are available for short term contracts in specialised employment and a fourth element are people available for temporary work which comes up in holiday time but also to cover enforced or paid absences within a company. The opportunities are there for someone with contacts and the determination to build up even more. 

Cash flow issues

It is not all plain sailing if you run a recruitment agency and are responsible for paying everyone on your books yet find yourself waiting for your clients to pay you. Your biggest client could be your slowest payer and that will inevitably cause you cash flow problems, which you need to solve. Without a planned and accurate cash flow you can go out of business quickly.

Much depends on whether you specialise. If you have many weekly paid contractors on your books yet get paid monthly, then that alone needs to be taken into account when you are preparing your forecasts and cash flows. One obvious answer is to factor your invoices so that you receive 90% of the invoice total immediately and the balance when it has been paid. 

Factoring an answer

The factoring company specialises in credit control and will take over that function from you, and will likely be more effective. There are fees involved and you can decide whether you want to pay a smaller fee and do your own credit control, but it is hardly ever worth it.

It may complicate things but there is an argument that you may want to do some of your own invoicing and collection because you are assured prompt payment and it has always happened in the past. You perhaps think it is not worth the trouble for the saving you would make. 

Reduce your administration

You can decide to actually use third party services for everything relating to your payroll including the statutory returns to the taxman, the payments to everyone, and all the paperwork that is involved. If you go further and actually outsource your invoicing, you can get the VAT returns done every quarter as well. It is something that would certainly reduce your own administration.

If you are able to concentrate your energies on finding more clients and placing more people then your turnover will increase. That is surely your area of expertise? Knowing you can leave many of the administrative and financial problems to a specialist is reassuring and one less worry for you on a daily basis.

Recruitment factoring allows you to identify your financial commitments and meet your liabilities on time, even if some of your clients are not so responsible.

How Do You Know If Factoring Receivables is a Good Option for Your Company?

Factoring receivables is something small or mid-sized businesses often use when they are in need of cash flows. This is nothing but selling your purchase orders to someone else and getting cash earlier, and then it is the factor or the purchaser of your orders who collects the amount from your customers. Whenever a firm decides to make use of factoring receivables they sell off their purchase orders to a factor for eighty or sometimes even ninety percent of the value of the orders. Then it is the responsibility of the collector to get the cash from the customers on behalf of the company. After the receivables are received by the factor, they give an amount to the seller. This amount is the total value of the orders minus the advance the factor paid up front.

What’s the Catch?

The factors deduct around two to three percent from this amount as their fee towards offering factoring service. This is two to three percent of the amount that the factor has to receive or has received from the customers. Let us now try to understand if factoring is good for your business or it is not.

It’s Another Form of Loan

It is important to understand that factoring is just another glorified name of borrowing money and money should not be borrowed under ideal circumstances. In simple words, factoring services should not be availed if there is no need for it. Consider this, with one to three percent that you pay every month towards the services you get your annual fee can be anywhere between twelve to even thirty six percent, which is pretty big. This is too big a fee to pay for just getting a lump sum one month in advance. The businesses can be better off making use of the local banks to borrow the money they need as they offer at much lower interest rates compared to factoring service providers. This would also be a much more cost effective option considering the long run.

It Makes a Great Practical Choice to Maintain Cash-Flow

That being said, the practicality of factoring services can’t be overruled completely. There are cases where this is the only option in front of you. If yours is a small company or business, which has either poor, limited or no credit at all and you need some cash urgently, factoring can be the only option that you may have to resort to. For example, one of the leading trucking factoring companies in USA, Pay4Freight has helped many companies in crunching times. You can learn about Pay4Freight's factoring service by visiting their official website. Similarly, there are many such companies that help small businesses every now and then.

The Best Bet for Small Businesses

Small companies are often unstable and not well established to be self-sustained for all kinds of projects. Then often need one cash injection to get their dices rolling and that is when they approach these factoring companies. With one push of a lump sum they manage to finish some of their initial projects and generate revenue. They don’t necessarily have to do it over and again. As long as these factoring services are availed in a smart way, they can be leveraged to your advantage. But, make sure that you don’t become dependent on these services for your monthly cash requirements.

Author Bio - Robert Beard works for a factoring agency called Pay4Freight and offers his services to leading trucking companies in and around the United States of America.

Invoice Factoring Costs: A Small Price for a Great Help

Apart from the recurrent growth of a business, its very survival depends upon uninterrupted cash flow. However, for many businesses, the newer and the smaller ones in particular find it quite difficult at times to avail funds from various sources. 

Invoice factoring, is one of the latest inventions in the finance market. In this process an entrepreneur sells his unpaid invoices to a third party, i.e. the factoring company. The money he thus receives is used to fund his business. 

As far as the factoring company is concerned they collect the payments against the invoices from the customers.

 

The Factoring Rates

The factoring company, charges a certain amount as payment for the immediate service they offer. The factoring cost is charged as a discount on the amount it pays to you. 

In most of the cases a factoring company has charged a discount rate of about 1.5 to 5%. How the rates will be structured depends upon the company itself. 



However usually it is based on a daily segment, for instance a segment of 10, 20, 30 days or so and it is a percentage of the invoice value. 

Calculating the Factoring Cost

The calculation is pretty simple. For instance, if you run a business which is going to factor a sum of 50,000 dollars a month at a factoring rate of 2% every 10 days. Therefore, you would have to incur a factoring cost of 6% of the total Invoice value for a 30 days customer.

It wouldn’t be an extra or unnecessary expenditure, since in all probabilities you would have allowed a certain discount to the customers for speedy payments, which neutralizes the expenditure.

However, you need to make sure that Invoice Factoring suits the nature of your business. For instance, if you need cash flow to continue business operations, it is imperative to factor invoices to keep the lights on. 

For example, independent truckers often need freight bill factoring to buy more fuel and perform maintenance on their vehicles to continue working. Once you are decided, you would have to go online and look for a suitable factoring company. Get online quotes from them. 

The companies will ask you to produce your customer list and receivable accounts aging list for review to assess the credit risk and the time they would have to wait to for the payment. 

Higher Charges for Better Services

You must as well be prepared for factoring rates varying up to 90%. But, it would necessarily mean that the company offers a better and a much higher amount as compared to other factors. 

If you find that the factoring company charges you a higher rate, since it offers you extra services, figure out if you need those services at all. You will obviously not wish to be shocked by any hidden charges later and thus it is important, to go through the terms and conditions of a contract before you put your signature in it.

The business lending market is no more solely depended on the banks. Invoice factoring has helped small business owners to a large extent by bringing ready funds to them, against the unpaid invoices.

Factoring services are not expensive. Therefore, if you are asked to pay absurd rates make sure that you have are the clauses and are getting services worthy of the payment. 

If not, then you are treading on the wrong path. Search for companies, which offer useful services and reasonable rates. It is not hard to find one!

Author’s Bio

Emily Jones is a freelance author penning articles on Invoice factoring and other finance deals for twenty five years now. She suggests that one should find Out What Invoice Factoring Costs are before he decides on factoring his invoices.