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• 22 Oct

  Funding Invoices To Neutral Vendors

  

  Funding invoices to neutral vendors is a specialist invoice finance service that is not available from all providers. Fortunately, recruitment companies that supply neutral vendor companies can get invoice finance from specialist lenders.

  Funding Invoices To Neutral Vendors

  Small and medium-sized temporary staff agencies can often find themselves supplying large organisations via an intermediary organisation. This is due to the ultimate buyer seeking to streamline their purchasing via an umbrella recruitment provider. These intermediaries are often referred to as "neutral vendors" (NVs) or "RPOs" (recruitment process outsourcing) organisations. Funding RPO invoices has become very important for many recruiters.

  Invoice finance (often called "payroll finance") is widely used within the temporary labour sector. This is because it releases cash from unpaid invoices that can be used to pay the staff payroll. However, when dealing with an NV, this can require the agency to find the right invoice financing company, as not all will fund the invoices to NVs at the levels that many recruiters need.

  Understanding Neutral Vendor Invoice Finance As A Funding Solution for Recruitment Agencies

  Neutral vendor invoice finance is a specialised funding solution that allows recruitment agencies to manage cash flow while working with neutral vendors. As more agencies turn to neutral vendor-managed services, the need for a steady cash flow becomes crucial, given that payments from vendors may follow extended terms. This type of financing ensures that agencies can cover their immediate costs, including payroll, without being impacted by payment delays from neutral vendors.

  Neutral Vendors Versus Master Vendors

  Managed services within the temporary recruitment sector is not a new service, but rather one that has developed over time. In the past, a "master vendor" may have been sought by larger companies. This was a single recruitment company that would be contracted to deal with all the temps required by the ultimate customer.

  Over time, this model has developed into the neutral vendor model whereby a single independent purchasing organisation sits between the ultimate customer and a number of recruiters that each deal with part of the customer's overall requirement. The customer wins by still dealing with a single company to handle all their temporary labour needs. The neutral vendor wins over the master vendor model, as the NV can source staff from a wide range of smaller recruiters. This creates flexibility.

  Many recruitment agencies rely on neutral vendor invoice finance to manage the unique cash flow demands associated with neutral vendor partnerships. This finance option bridges the financial gap, ensuring that agencies can meet payroll and operating expenses even when payment from the vendor is delayed. This funding solution has become essential for agencies working in sectors where neutral vendors manage placement services, as it allows the flexibility to scale while mitigating financial strain.

  Removing Funding Restrictions

  If you have experienced funding restrictions against sales to NVs, it may be because you are not using the most appropriate funder for your situation. The approach to risk, and hence the liberality of funding varies between different receivables financing organisations. In the past, we have successfully helped customers improve funding against RPO debtors. It may be possible to improve your funding percentage by shopping around the invoice financing market.

  With neutral vendor invoice finance, agencies gain peace of mind, knowing that they can continue operating smoothly, regardless of vendor payment terms. This financing solution helps recruitment firms build lasting relationships with clients while maintaining a healthy cash flow.

  By Glenn Blackman