Agency work

[surferXXX]

Anyone had an experience of operating as a small-scale agency i.e. having one or more other contractors working through your LTD. I've been considering this as a previous client has a couple of openings and I’ve suggested employing them through me for a 10% margin and he’s interested.

Logistically it’s a simple invoicing / timesheets exercise, the main potential problem I can see is that I would be paid by the client probably 30 days from receipt of invoice and would pay the contractor a max of 8 days after receipt of timesheets so at least 22 days of work I’d effectively be paying the contractor up front. Obviously if the client doesn’t pay on time then your still paying the contractor!! Also anyone know how agencies handle this. Do they have a general rule that after X number of days they pull the contractor. Anybody else had experience of joining the enemy!!

I’ve thought about this as a possible sideline for a while. Obviously to make a living out of it involves a horrendous amount of cold calling in an already crowded marketplace but to do it as a sideline with clients you have a good relationship and will trust your judgement on good contractors there could be a chance to get a second income stream….. if nothing else good from an IR35 point of view….

[Martin Underwood]

In a word: Factoring

What you're describing (regarding the client's payment terms being longer than the contractor's payment terms) is called factoring.

You have three options:

1. You pay a factoring service to factor your invoices for you. In other words, when the contractor submits the invoice to you, you then invoice the factoring service, who pay you within, say, 5 days. You then pay the contractor. The factoring service invoices the client and waits 30 or more days for payment from the client. Typical charges for factoring depend on a number of things (such as difference in payment terms between upstream and downstream contracts, credit rating of client, etc) but can be anywhere from 2-5%.

2. You keep enough cash in the bank to absorb the timing differences. ie. you are providing the factoring yourself. Naturally, this option will gain you more money, but as you say, it has its risks. I suppose you could see if your business bank account offers an overdraft facility, which can be dipped into 'just in case'

3. You word your contract with the contractor so that even though you strive to pay within 5 days of invoice, you actually have 30 days to pay the invoice. This at least allows you to delay payments in the worst case scenario without committing a breach of contract.

[surferXXX]

cheers

Cheers Martin. Very good clear advice!! I take it your in this line of work full / part time..

[DodgyAgent]

factoring

I will run the contract for you at 4% provided that the client has a good credit rating

email me if you are interested at:

[email protected]

[BillyBobHathaway]

Re: factoring

surfer,

and kiss your contacts goodbye! (sorry DA, but it has happened too often to me)

what business is without risk? you want a little extra dosh? make sure you have one month's worth of pay in the company and sign your mate up. it's no different than going direct yourself, just make sure you have a lawyer look at the contract.

Good luck.

BB