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Growing Pains 1/2

I spoke to my invoice finance company last week and they politely notified me I am going to exceed my funding limits next month. Apparently, I’m one of their fastest growing clients. For the uninitiated, invoice financing companies give you a certain percentage of the value of your client invoice. So if I place Joe Bloggs at Springfield NHS Trust, charge 1000 / day, and raise my first invoice for 5000 at the end of week 1, the invoice company gives me 90%, or 4500, which of course I use to pay my interim. When Springfield NHS Trust pays the invoice finance company, they keep their 90% and pay me the remaining 10%, minus a small fee of course. It’s a vital service for start-up recruitment businesses, especially in the high value world of interim, because unless you have a few hundred grand in the bank, you’re not going to have the cash flow to pay your interims. And even if you do have that kind of cash in the bank, you might want to think about whether it’s a good use of capital to tie it up in cash flowing interims (paying it out, waiting / chasing for it to come back in). Invoice financing comes at a cost but the costs come down significantly the lower the credit risk of the client base, and if you’re only doing business in the NHS? Well hey, they’re good for their money, for the time being at least.

So what am I going to do about that funding limit? No problem – they said I just need to see some additional assurance around client contracts and timesheets and also provide my management accounts so far. Ah yes, my management accounts. This is the classic non core activity, which quite frankly is a distraction from what I love doing best, talking to candidates and clients, building relationships and making placements. I have no management accounts, so every evening in the first two weeks of January I’ve been preoccupied building retrospective accounts by inputting all of my client invoices and candidate invoices to an online accounting package, (xero – fantastic product) aswell as loading in every bill and receipt so far. I’m nearly there, and my accountant will sign off the management accounts and my invoice finance company can up my limits. Processing the backlog of information has been onerous and distracting but as a candidate said to me, it’s a headache with a lovely cause and very promising outcomes.