UK recruitment agency with end-client extending payment terms

Why do major end-clients extend recruitment payment terms?

UK enterprise procurement teams regularly review supplier payment terms as a working-capital optimisation tool. Recruitment agencies are a common target because the spend volume is large, suppliers are perceived as having limited bargaining power, and the impact on supplier viability is rarely the procurement team's primary concern.

A common pattern is 30-day terms moved to 60 or 90 days, sometimes with little consultation. The impact on the agency: paying contractors weekly while waiting longer for client payment creates a structural working-capital gap that didn't exist before.

What finance routes engage with extended-terms recruitment files?

Three live routes. (1) Sonovate, a UK funder focused on recruitment and contractor businesses. (2) Invoice finance providers such as Bibby Financial Services, Close Brothers and Ultimate Finance, which fund approved invoices; check each facility's maximum funding period and how longer client terms affect its cost. (3) Specialist recruitment lenders with end-client-specific underwriting where the client is a known large enterprise.

How does Sonovate handle extended payment terms specifically?

A funder like Sonovate looks closely at the end-client's credit quality. With funding in place, cash arrives when the invoice is funded rather than when the end-client eventually pays, so the agency can keep paying contractors on time. Ask how longer client terms affect the fee and what happens if an invoice stays unpaid.

See <a href="https://marketinvoice.co.uk/best/best-for-recruitment-with-sonovate/?utm_source=fundbiz&utm_medium=referral" class="text-brand underline" rel="noopener">Sonovate for recruitment</a>.

Can I push back on the client?

Sometimes. Three commercial responses possible. (1) Negotiate, for established agency-client relationships, polite but firm push-back sometimes restores shorter terms or earns a partial concession. (2) Reprice, charge a higher placement fee on the extended-terms work to compensate for the additional working-capital cost.

(3) Walk, for smaller end-clients without a defensible business case for the extension, declining the new terms and ending the relationship is sometimes the right answer. The right response depends on the client size, relationship history, and competitive alternatives.

What about payment codes and statutory protections?

Large UK companies must publish their payment practices and performance under the Reporting on Payment Practices and Performance Regulations 2017. The voluntary Prompt Payment Code has been replaced by the Fair Payment Code, run by the Office of the Small Business Commissioner since December 2024; its Bronze award requires paying at least 95% of invoices within 60 days, and its Silver and Gold awards set 30-day standards.

Public sector contracts generally require payment within 30 days. A small agency may be able to complain to the Small Business Commissioner about late payment by a larger customer.

Does extending terms damage my agency's ability to grow?

Yes, structurally. Working-capital gap means each new placement now requires more agency cash to support. Agencies operating at thin temp margins reach a working-capital ceiling where new placements can't be funded from existing cash flow. Invoice finance unlocks this ceiling, which is why many established UK recruitment agencies run invoice finance facilities continuously rather than ad hoc.

How quickly can IF be set up to respond?

Set-up times vary by provider and by how quickly you can supply debtor, contract and bank information, so ask each provider for its current timescale. If a client has told you terms are changing, start comparing providers as early as possible, before the new terms take effect.