For recruitment agencies supplying temporary or contract staff, invoice finance is often the lifeblood of the business. It enables agencies to pay workers weekly or monthly, before receiving payment from clients.
While most invoice finance providers offer funding of around 85–90% of the value of approved invoices, this level of funding is only maintained if the facility is operated correctly. If not, the provider may withhold funds or refuse to support certain invoices or debtors.
Regularly monitoring your facility for “ineligible” debt is essential. Below are the key steps to ensure your agency consistently receives maximum funding.
INVOICES MUST BE ACCURATE AND RECEIVED BY THE CLIENT
Invoice finance companies will only fund valid invoices that have been received and accepted by the client. If there is any doubt about accuracy or delivery, the invoice can be removed from the funding ledger, which immediately reduces the available cash.
As part of your credit control (dunning) process, it is best practice to:
- Confirm the client has received the invoice
- Ensure there are no disputes
- Obtain confirmation that payment will be made within the agreed terms
MONITOR CONCENTRATION LIMITS
Funders are cautious when too much of the sales ledger is tied to one or a small number of clients. This creates risk if:
- A key client ceases trading
- A dispute arises
- The relationship ends unexpectedly
Concentration limits may also apply to overseas or export debtors. If these limits are exceeded, funding can be restricted. Agencies should monitor their ledger profile regularly and speak to their funder in advance if a breach is likely.
KEEP INVOICES WITHIN THE FUNDING PERIOD
Most invoice finance facilities fund invoices for 90–120 days from the invoice date. This should comfortably cover typical recruitment payment terms of 30–45 days. However, if clients delay payment and invoices age beyond the funding window, the associated funding will be withdrawn.
To avoid this:
- Act early when payment patterns change
- Maintain strong, consistent credit control
- Consider legal recovery action where necessary
Protecting the ageing profile of the ledger is critical to maintaining cash flow.
COMPLETE RECONCILIATIONS ON TIME
With invoice discounting facilities, monthly reconciliations are required to ensure the funder’s ledger matches the agency’s accounting system.
Funders set strict deadlines for these reconciliations. Missing them can result in:
- reduced funding
- suspension of the facility until reconciled
A disciplined month-end process is essential.
ENSURE CLIENT CREDIT LIMITS ARE SUFFICIENT
Funding availability is usually linked to the approved credit limit for each client, based on the funder’s credit checks. Where a client has no credit rating or a low credit limit, funding above that level may be restricted.
However, funders will often consider increasing limits where there is strong payment history, evidence of remittances due or a director’s undertaking to cover any shortfall.
These conversations should happen before the limit becomes a barrier to funding.
MAXIMISING YOUR FACILITY IS ABOUT ACTIVE MANAGEMENT
An invoice finance facility is not a “set and forget” solution. To unlock its full value, it must be actively managed with:
- Accurate invoicing
- Disciplined credit control
- Regular reconciliations
- Forward planning around ledger concentration and credit limits
MAYACHI Ltd has many years of experience managing the day-to-day administration of invoice finance facilities across a wide range of providers. We support accounts teams in maximising available funding, help agencies operate their facilities in line with funder requirements and introduce suitable invoice finance partners aligned to the needs of the business. This ensures your facility delivers the highest possible funding levels to support contractor payroll and business growth.