Invoice finance provides essential funding to recruitment companies that make temporary or contract placements. These agencies must often pay candidates before their clients make payment, and invoice finance bridges that gap.
The facility typically provides 75–90% of the client’s invoice value upfront. This advance should be enough to cover candidate payments while the agency waits for client funds to arrive.
If managed properly, an invoice finance facility should always keep an agency funded to its maximum limit. However, there are certain situations where an invoice finance company may not fund an invoice or may only fund part of the debtor’s book.
Below are the main reasons this can happen, along with practical steps to resolve each issue.
BREACH OF CONCENTRATION LIMITS
Invoice finance companies prefer a diverse debtor book. When an agency relies too heavily on one client, it increases financial risk. To manage this, providers often impose concentration limits, or caps on how much funding can come from a single client. If one client grows beyond that limit, the finance company may restrict or even stop funding against that client’s invoices.
Resolution:
Have open discussions with your invoice finance provider. If the debt is credit-insured or there is proof of payment, the provider may agree to release additional funding.
NON-PAYMENT OF INVOICE
Most invoice finance providers fund invoices for 90–120 days. After that, the invoices are considered too old and are no longer eligible for funding. Any amount prepaid will be reversed, and the invoice will be reassigned to the agency.
The upside? If the client pays after that period, the agency receives 100% of the invoice value directly.
Resolution:
Maintain a strict credit control process. Chase overdue invoices promptly to avoid reassignment and loss of funding.
CLIENTS WITH NO CREDIT RATING
Invoice finance companies usually fund invoices that are credit insured. Anything above the insured limit is at the agency’s risk.
If a client has no credit rating or the debt exceeds the insured amount, the provider may refuse to fund invoices for that client.
Resolution:
Before engaging a new client, always run a credit check. Make sure a sufficient credit limit is available before sending candidate CVs or progressing with placements. This prevents scenarios where the deal can’t be funded after the work has already begun.
NON-RECEIPT OR INVALID INVOICES
Under a factoring arrangement, the finance company typically checks with clients that invoices have been received and approved once they’re seven days overdue.
If a client reports that an invoice hasn’t been received or is incorrect, funding will be immediately withdrawn until the issue is resolved.
Resolution:
Include a step in your credit control process to confirm receipt and validity of each invoice within seven days of sending it. This prevents funding disruptions later on.
PAYMENT RECEIVED INTO INCORRECT BANK ACCOUNT
All payments for financed invoices must go into the trust account set up by the invoice finance provider. However, clients sometimes pay into the wrong account, often by using old bank details or confusing permanent invoice details with those for temporary or contract placements. This can result in duplicate funding (the agency receives both the finance advance and the client payment).
In such cases, the payment should be transferred to the provider’s trust account immediately to repay the funds lent.
Resolution:
Monitor incoming payments carefully. If a client pays into the agency’s account by mistake, transfer the funds the same day and notify your finance provider to avoid funding restrictions.
It’s also good practice to inform the client, so they use the correct details for future payments.
At MAYACHI, we’ve helped many recruitment agencies set up their own invoice finance facilities — and supported those struggling with funding issues caused by ineligible invoices or breaches of agreement. We can introduce you to trusted banks and invoice finance companies to ensure your facility meets your agency’s needs and provides funding up to the full prepayment level.