Sonovate is an invoice finance provider dedicated specifically to addressing the cashflow issues that are frequently encountered by recruitment agencies – a task which has traditionally fallen exclusively to the banks. The platform offers a catchall solution to the multiple headaches associated with running and financing contractors – which include processing timesheets, payments, invoicing, credit control and factoring.
The platform was established in 2012 by a team with over 25 years of experience in the recruitment business. At first glance you might imagine that the platform, whilst innovative, is perhaps too narrow in its focus. But, as mentioned, newly uncovered Sonovate research shows that UK recruitment agencies are currently sitting on £6bn in unpaid invoices. Recruitment agencies reportedly face an average of £314,991 in outstanding late payments each year. The average startup agency founded after 2013 is already owed in excess of £100k – spiraling up to an average of £600k for those that have been active for at least a decade. These findings are based on an analysis of Companies House data.
“Cashflow is vital for the survival of small businesses, and as these figures demonstrate, it is stopped by neglectful clients exceeding their agreed repayment times. In contract recruitment the repayment window typically sits between 28 and 45 days, but in reality payment materialises between 45 and 60 days, if not longer.
“A culture of fear prevents small businesses from challenging large clients to pay on time – they don’t want to rock the boat and risk losing out on repeat business. And without any real regulations enforcing timely payment, many SMEs are left with inadequate finance solutions from banks to address the shortfall left from delayed invoice payments.”
The banks, which prior to Sonovate effectively represented recruitment agencies’ only viable invoice factoring solution, may charge anywhere between 10-40% on the value of receivables. Agencies using Sonovate are advanced 100% of the value of their invoices within a week of issuance. The platform’s fees are extracted as a percentage of annual turnover – deducted per invoice. The Sonovate platform allows businesses to establish rolling monthly contracts, as opposed to more traditional products that carry a 12 month minimum contract. Invoices are not funded via a collection of online investors – in other words it is not a marketplace lender.
Mr. Prime continued:
“Until businesses change their position around unethical payments, and banks do more to understand the unique requirements of the recruitment sector, UK recruitment companies need to look elsewhere to address this issue.”
“That’s exactly why I founded Sonovate – so recruitment agencies can relax safe in the knowledge that their cashflow is secure and their contractors are being paid so they can get on with growing their business.”