Labour hire has a timing problem that most industries don’t. Your workers get paid every week or every fortnight, but your clients pay 30 days later, or 60… whenever their accounts team gets around to it.
In between, you’re covering wages, super, insurance and payroll tax out of your own cash.
That gap is manageable when things are quiet but it gets uncomfortable when you grow. Every new contract puts more people on your payroll, and every extra worker adds to the wages you’re fronting before a single invoice gets paid. The better the business does, the tighter cash gets.
Picture 40 workers on site for a big client. They’re turning up on time, the client is happy, the work is getting done. Meanwhile the invoice for all of it sits in someone’s approval queue for weeks. You’re doing everything right and you’re still checking your bank balance the night before pay day.
Invoice finance is one way to close that gap. In this post, OptiPay covers how labour hire companies use it to fund weekly wages and say yes to bigger contracts without waiting on client payment terms.
Why this is useful
If you run a labour hire business, you already know payroll can’t wait.
What’s less obvious is how much of your decision making ends up shaped by it. Do you take that new contract? Do you place ten more workers this month? Those answers shouldn’t depend on when a client’s invoice happens to clear. Understanding how invoice finance works gives you another option, and it’s worth knowing about before you’re in the middle of a cash crunch.
The cash flow challenge unique to labour hire
Most businesses can push a bill back a week if they have to. Labour hire can’t.
Wages have to land on time, super has to be lodged (especially with Payday Super), and insurance and payroll tax come due whether or not your clients have paid you.
Meanwhile plenty of clients, including the good ones, work on long payment terms. It’s rarely personal. Big organisations just run slow approval processes.
Here’s how that plays out:
Say you pay a placement’s wages two weeks running before the invoice for that work has even been approved. Now multiply that by a few dozen workers, or a few hundred. You’re carrying tens of thousands of dollars in wages for work that’s already done, and nothing is wrong with the business. The client is happy and the staff are working, the money is just late.
Invoice finance closes that gap by advancing you up to 90% of an invoice’s value shortly after you raise it, instead of making you wait for your client to pay.
The balance, less an agreed fee, comes through when the client settles. Unlike a traditional loan, it’s tied to invoices you’ve already raised, not to your property or your projected revenue.
Making sure wages go out on time
Wages are the one thing you can’t be late on. Miss a pay run and workers stop trusting you, the good ones start looking elsewhere, and your clients start wondering whether you can deliver. That kind of damage takes a long time to undo.
With invoice finance in place, the cash for this week’s pay run comes from invoices you’ve already raised, not from whichever client happens to pay first. You can stop juggling payments and just run payroll.
Taking on new work without waiting for cash
Labour hire demand comes in waves. A client wins a big project, a seasonal rush hits, or a site suddenly needs 30 people by Monday. Great problem to have, except every one of those workers has to be paid before the client pays you.
Turning down work because you can’t afford to staff it is one of the most annoying ways to lose revenue.
Invoice finance grows with your invoicing: the more you bill, the more funding you have available. That’s a big part of why it often suits a growing labour hire business better than a fixed overdraft limit.
What payroll pressure does to owners
Talk to labour hire owners and payroll worries come up fast. The margins can be tight, the pace never lets up, and when cash is unpredictable you end up second-guessing everything.
Can we afford to take this placement? What if two clients pay late in the same week? Knowing the cash will be there takes a lot of those questions off the table.
You get to make decisions based on what’s good for the business, not on what you can survive until the next payment lands.
Protecting client relationships
Chasing payments is awkward when the client is also someone you want to keep working for. Some owners end up pushing for shorter terms just to make cash flow work, and that can cost them the contract. With invoice finance you don’t have to. The client keeps its normal payment terms and you still get access to the cash.
This matters most with large organisations, where payment cycles are rigid and nobody is going to change them for you.
Where invoice finance fits
Invoice finance isn’t the answer to every money problem, and it won’t fix a business that isn’t profitable. But if your issue is that wages go out weekly and payments come in slowly, it’s built for exactly that.
It takes the timing problem off your plate, so you can spend your energy on placements and clients instead of your bank balance.
Blog in summary
Labour hire pays wages weekly and gets paid weeks later, and that gap widens the faster you grow. Invoice finance lets you draw on money you’ve already earned but haven’t been paid yet, so payroll goes out on time and you can say yes to new work. To see whether it suits your business, get in touch with OptiPay.
Frequently asked questions
How quickly can I get paid on an invoice?
With OptiPay, you can get up to 90% of an invoice’s value within 24 hours of approval. The remaining balance, less the agreed fee, is paid when your client settles the invoice.
Is invoice finance the same as a business loan?
Not quite. A loan is a lump sum you pay back on a set schedule, usually with interest. Invoice finance advances you cash against invoices you’ve already raised, and you pay a pre-agreed fee when your client pays. With OptiPay there are no fixed repayments, and no property security is required.
What does invoice finance cost?
You pay an agreed discount fee on the invoices you fund, and only when your client pays them. The fee is discussed upfront so there’s no surprises.
Can my labour hire business use invoice finance?
It suits businesses that invoice other businesses, which covers most labour hire companies. OptiPay works with businesses turning over $1 million or more a year, with facilities from $100,000 up to $10 million. Approval is based on your current sales and your clients’ credit, not your trading history, so it can be an option even when a bank overdraft isn’t.
