![]() With Factoring the lenders look more closely at your debtors than at your own business, as their risk lies largely with the debtor being able to pay the debt. The less risk they have of defaulting, the cheaper the BDP rate will be and vice versa. Lenders will make a charge for Bad Debt Protection (BDP) and that varies depending on who your clients are. A factoring agreement can either include bad debt protection (non-recourse factoring) or not (recourse factoring). The service provider is in the position of owning the debt and as such a ‘notice of assignment’ is placed at the bottom of your invoices informing your customers that it is the factoring company that must be paid for them to clear their obligation. ![]() Back-office duties are the responsibility of the recruitment business. NHS)) and 4.0% would be typical of a £50k funding line, with all back office functions carried out by the service provider and would typically include Bad Debt Protection.Ī factoring agreement provides the business with the funding (again, generally 90% for the recruitment sector) as well as credit control functions. Rate Range: 4.00% - 1.25% of the turnover value (1.25% would be typical of a £1m + funding line with blue chip clients (i.e. Rates vary depending on your company’s turnover and which tasks are undertaken by the supplier. When we started out, we used to complete these tasks on a Tuesday night, with the outsourced payroll company receiving our PAYE requirements first thing on Wednesday morning, giving us time to set up the BACS run for Friday morning. Alternatively, if you have someone in the business who is basic accounts savvy and you’re only raising a small number of invoices, it might be worth building this into their working week. Depending on the number of invoices you raise it may be worth looking at a part-time bookkeeper. Alternatives worth looking at would be to use a payroll company for PAYE temps and raise invoices internally, using Xero or similar. ![]() This can be a great solution for a smaller agency that has no back-office functionality, although it can be an expensive solution. The supplier will hold back VAT & HMRC taxes to be paid at the due date as well as making payments to your temps each week. Generally, all turnover goes through the supplier and the agency can draw down the gross margin element only. ![]() This facility will be charged as a fixed percentage of turnover. This will normally include invoicing, payroll (can include HMRC submissions), credit control, and bad debt protection. This is where the service provider offers back-office services in addition to lending funds. However, depending on the lender it can be possible should you want to. You will normally be offered a lower pre-payment percentage (50-70%) subject to the terms of rebates with your end client, should the hire not work out. Most agencies don’t factor permanent invoices as there are no incumbent costs associated with the deal, unlike a temp invoice whereby you need to pay the temp at the end of the week. Invoices for permanent placements can be factored, however generally only as part of an agreement where you have a facility for your temp invoices. This applies to invoices for temporary staff. The predetermined amount can vary, but in recruitment, 90% is the norm. The basic premise of Invoice Finance is that you receive a pre-agreed percentage of your invoice within 24 hours of raising it.
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