The world of temporary / contractor recruitment relies on two major components: How am I going to fund the payment of the workers? and How am I going to pay the workers?
There are two main ways of financing temporary and contractor placements for recruitment agencies.
- An All in One, Invoice Funding with Pay and Bill.
- An Invoice Finance Facility with an Outsourced Pay and Bill Solution.
Both methods have their pros and cons.
An All-in-One solution can work well and seem like perfection solution for start up recruitment agencies or agencies pivoting into the contract/temporary market for the first time. However, these types of All in One solutions do usually come at a higher cost and can very quickly become an expensive option.
Separating your Invoice Finance and Pay and Bill providers, can a more cost effective option, and those cost savings could be significant, especially as your recruitment business starts to grow. Many of the Invoice Finance companies offer a much lower lending rate to agencies who just require a lending facilities and outsourced Pay and Bill providers are generally not as expensive as you might think.
But before you decide which option is best for your recruitment agency it is important to distinguish between the two main types or Invoice Finance, Invoice Factoring and Invoice Discount.
Invoice Factoring
Invoice factoring involves selling your unpaid invoices to a finance provider. The provider pays you most or in some cases all the invoice value upfront and but then own that invoice and on the takes on responsibility for collecting payment from your clients. This is typically the method used by All in One providers.
Pros:
- Immediate access to working capital
- Credit control managed by the provider
Cons:
- Clients know a third party is involved
- Costs may be higher than discounting sometimes up to 5% of the total invoice value.
Invoice Discounting
Invoice Discounting allows you to borrow and releases cash tied up in Invoices, but allows you continues to manage collections. Your clients usually won’t know you’re using a finance facility as the invoice will be paid directly into your own company bank account.
Pros:
- Confidential – client relationships remain unchanged
- More control over credit management
- The cost of borrowing against the invoice is considerably less than factoring, generally around 1.5% to 2.5% of the amount borrowed.
Cons:
- You need to have either a strong in-house credit control facility or an outsourced Pay and Bill solution.
- You may be limited to only borrow up to 90% of the invoice value until the invoice is paid
So, as you can see, Invoice Discounting gives you more control will save you money. As an example, if you are billing £50,000 per week on your temporary/contractor desk, every 2% you save on your borrowing costs will give your will provide you extra £1,000 revenue.
At Pay Guardians, we work with and alongside Invoice Finance brokers to will provide you with a whole market review to get you the best Invoice Finance deal.
But in order to achieve these savings, you need to make sure that you have a robust back office provision in place and that is where Pay Guardians Pay and Bill solution can help you.
With over 30 years’ experience in accounts and payroll, specifically in temporary recruitment, we have assembled the best people so that we can create the perfect environment to handle your agency’s back office activities with care, diligence and efficiency.
Our Pay & Bill service provides end-to-end payroll and billing operations for recruitment agencies, acting as the operational bridge between workers, payroll providers, clients, and third-party invoice Finance companies. The service supports accurate payroll processing, client invoicing, and invoice finance drawdown administration.
This is a summary of the services that we provide:
Timesheet Management
- Provision of Online Timesheet Portal
- Contractor and Client approval by email
- Timesheet reminders and chasing
- Validation and audit trails
- Management of manual timesheet process
Client Invoicing
- Invoice generation from approved timesheets
- Custom invoice formats
- Consolidated or split invoicing
- Credit notes and invoice adjustments
- Invoice distribution via email
- Candidate Payroll
Credit Control
- Credit control activity in line with agreed client processes
- Invoice status tracking and follow-up
- Management of invoice queries and disputes
- Aged debtor reporting
- Liaison with clients and invoice finance providers regarding outstanding invoices
- Reporting Suite
Invoice Finance / Invoice Discount Interface
- Upload of approved client invoices to invoice finance/discount providers
- Drawdown request preparation and submission
- Drawdown tracking and reconciliation
- Liaison with funders on invoice queries
- Accounting & Sales Ledger Integration
- Posting of sales invoices to accounting systems
- Integration your instance of accounting software.
- Customer account setup and maintenance
- Payment receipt posting and allocation
Payroll with various options
Agency PAYE (Agency PAYE Reference) ran by Pay Guardians on behalf of the agency
- Gross to Net payroll calculations
- Generate BACS for payment of workers out of your bank account
- Payslip production and distribution
- Holiday pay calculation and accrual
- RTI production
- AWR reporting
- Margin calculation and reconciliation
- Weekly/Monthly pay runs
PEO (Workers Employed by Pay Guardians)
- All workers employed by Pay Guardians
- Workers paid under Pay Guardians PAYE reference
- Pay Guardians responsible for RTW checks
- Pay Guardians hold liability for PAYE and ERNI
- Employment Costs and SSP charged back to agency
- Workers paid from Pay Guardians back account.
- Third Party Payroll / Umbrella Companies Payroll Companies
Data preparation and distributed to external approved payroll companies.
Direct Worker Payments
Direct payment to workers where contractually agreed
Full suite of powerful and customisable report including
- Margin Reports by sector, consultant
- PAYE
- AWR
- Holiday Pay
Contractor Payroll & Worker Administration (optional services)
- SafeRec Accredited Umbrella and CIS payroll model
- Employed PEO model
- Worker onboarding and setup
- Bank detail collection and maintenance
- Starter information management
- Service & Support
Our Pay and Bill Service can be charged to clients either as a percentage of weekly invoicing or as a transactional price per timesheet model and all can be tailored to your business needs.
At Pay Guardians we are there to become an extension of your business, essentially becoming your back office team and can provide you with as much support and help as you require. But essentially we are here to take away you back office worries and allow you to concentrate on billing and building your business.
If you would like any information about how Pay Guardians Pay and Bill can assist your business then please get in touch today for a free consultation.
