How Easy Is It to Move from a Pay-and-Bill Solution to Your Own Invoice Finance Facility?

For many recruitment agencies entering the contract or temporary staffing market, a pay-and-bill solution is often the most practical way to get started. It provides immediate access to funding, simplifies administration, and allows agencies to pay contractors on time without waiting for client invoices to be settled. In the early stages of growth, this model can be incredibly valuable.

Pay-and-bill providers typically manage everything from timesheet approvals and client invoicing to contractor payments and profit distribution. Fees are often deducted automatically, and profit is released based on approved timesheets rather than waiting for customers to pay. For new agencies, this offers both financial stability and operational convenience.

However, as placement volumes increase and turnover grows, the cost of staying with a pay-and-bill provider can become significant. At this stage, many agencies begin exploring alternatives that offer lower fees and more control. One of the most common next steps is moving to a dedicated invoice finance facility, such as factoring or invoice discounting.

While the transition can bring long-term savings and greater flexibility, it does require planning. So, how easy is it to move from a pay-and-bill solution to your own invoice finance facility?

Why Recruitment Agencies Move from Pay-and-Bill to Invoice Finance

As recruitment businesses become more established, their priorities often change. In the beginning, receiving profit immediately through timesheet runs can be essential for keeping the business moving. But once the agency has stronger cash reserves and a steady contractor base, the convenience of pay-and-bill may no longer justify the higher fees.

Invoice finance facilities often provide a more cost-effective way to release working capital tied up in unpaid invoices while still ensuring contractors are paid before clients settle their accounts. In many cases, agencies also gain more direct control over invoicing and contractor payments, allowing them to manage the process in a way that suits the business.

That said, the switch is not simply a matter of replacing one facility with another. There are several practical considerations that can affect timing, cash flow and internal operations.

Invoice Finance for Recruitment Agencies: Building the Right Back-Office Support

One of the biggest operational differences is that an invoice finance provider will not usually deliver the same back-office support as a pay-and-bill company.

A pay-and-bill provider often handles:

With an invoice finance facility, these responsibilities move back to the agency.

That means recruitment businesses need to make sure they have a reliable internal finance and administration process before transferring. For some agencies, this may involve hiring finance staff or expanding an existing accounts team. Others may prefer outsourcing to a specialist back-office provider that understands recruitment funding and contractor payroll.

There can also be increased reporting expectations from the new funder. Invoice finance providers may request monthly or quarterly management accounts, debtor reports or cash flow forecasts. Having strong financial processes in place from day one can make the transition smoother and help maintain confidence with the financier.

Managing the Funding Gap When Moving from Pay-and-Bill to Invoice Finance

A key financial consideration is the funding difference between the two facilities.

Most pay-and-bill providers advance between 85% and 100% of the debtor book, depending on whether VAT is included in the advance. Invoice finance facilities generally lend slightly less, often between 80% and 90%.

While the percentage difference may seem small, it can create a short-term funding gap during the handover.

For example, if a pay-and-bill provider has advanced a higher amount against invoices than the new funder is willing to release, the agency may need to cover the difference. This is why planning the transfer date carefully is so important.

Many agencies choose to move:

Forward planning here can reduce disruption and ensure contractor payments continue without interruption.

The New Invoice Finance Provider Will Purchase Existing Debt

Another area to factor in is how outstanding invoices are transferred.

In many cases, the incoming invoice finance provider will purchase the debtor book from the pay-and-bill provider. This can involve service charges on the invoices being transferred.

As a result, agencies may temporarily pay fees twice on some invoices—once under the pay-and-bill arrangement and again as part of the invoice finance onboarding process.

This doesn’t usually outweigh the long-term savings, but timing matters.

To minimise duplicate costs, agencies often try to transfer:

A well-timed switch can significantly reduce transition charges.

Recruitment Agency Cash Flow Management After the Move

The biggest day-to-day adjustment is usually around contractor payments.

With a pay-and-bill arrangement, payments are often handled automatically by the provider. The agency receives profit, while the provider pays contractors directly.

Under an invoice finance facility, funds are advanced into the agency’s bank account, and the agency decides when and how contractors are paid.

This gives more flexibility—but it also creates greater responsibility.

Recruitment agencies need to understand:

How much funding is available to draw down
Which contractors need payment and when
Expected client payment dates
The right timing for withdrawals from the facility
How to maintain healthy working capital

For agencies used to outsourced administration, this can feel like a major shift at first. But with clear reporting and a strong finance process, many businesses quickly adapt and appreciate the extra control.

Understanding Profit: A Mindset Change for Recruitment Directors

There is also an important shift in how profit is viewed.

Under a pay-and-bill model, profit is often visible immediately. Once timesheets are approved, the agency receives income minus fees. It feels direct and easy to track.

With invoice finance, the position changes.

The funder may advance 80-90% of the invoice value upfront, but the remaining balance, including some of the profit, becomes available only once the client pays.

This means the full profitability of placements may not be reflected in weekly bank receipts.

Instead, recruitment directors often rely more heavily on:

For businesses used to seeing profit arrive through weekly timesheet runs, this can take some adjustment. But over time, it often provides a clearer and more strategic view of financial performance.

Is It Worth Moving from Pay-and-Bill to Invoice Finance?

For many growing recruitment agencies, the answer is yes.

A carefully planned move from pay-and-bill to invoice finance can reduce funding costs, improve financial visibility and provide more control over contractor payments and business operations.

The transition does require preparation. Back-office systems need to be ready, cash flow needs to be managed carefully, and the timing of the transfer matters. But with the right support and a clear plan, the process can be straightforward.

Most importantly, once the move is complete, agencies often benefit from a more scalable funding structure that supports future growth while lowering overall finance costs.

For recruitment businesses reaching the next stage of growth, moving from pay-and-bill to invoice finance can be a smart and cost-effective step forward.