A firm can have a strong pipeline and still face a tight month for cash flow. Mortgage cases do not always progress as expected, and the timing of income can change even when advisers have been consistently busy.
That is why a network fee cannot be judged by its headline rate alone. How the fee is charged, and how closely it follows the income being generated can have just as much influence on the financial position of the business.
With a pay as you earn model, network charges are linked to business banked. The amount paid is directly related to each months banked business levels. This keeps the cost linked to the performance of the firm, instead of applying the fixed fees often charged each month, with annual fees also applied monthly in many cases
Why the timing of network fees matters
Cash flow is dependent on when income is received and costs are paid. A firm may have several cases progressing, but that work will not necessarily produce income within the same accounting period.
Regular costs still need to be covered whilst cases move through the pipeline. If network charges remain the same each month, they can account for a larger share of the income received during quieter periods.
Pay as you earn responds to those changes. It does not remove variations in income, but it keeps network charges more closely connected to the business being generated.
What pay as you earn can mean in practice
The main benefit is the relationship between cost and activity. For a mortgage and protection firm, this can affect cash flow in several ways:
- Network charges flex with business levels, helping to keep costs aligned with income.
- As your business grows, charges increase in line with the additional income being generated.
- Firms can forecast network charges using expected business levels rather than allowing for the same charge every month.
- Seasonal changes in activity do not leave the firm carrying the same network cost during stronger and quieter months.
- New firms can build their pipeline without the main network charge getting ahead of the business being banked.
A pay-as-you-earn model is designed to align costs with business activity. While the overall cost will depend on the charging rate and the level and mix of business banked, its key benefit is that your network costs flex in line with your business performance.
A strong pipeline is not the same as cash in the bank
Pipeline value is an important measure of future business, but it does not pay today’s costs. Cases may move into a later month because of lender timescales, valuation issues, property chains or changes in a customer’s circumstances.
This gap matters when firms are planning their working capital. A busy period for applications can still be followed by a month in which less income is received than expected.
Under a pay as you earn model, the network charge follows business levels rather than the size of the pipeline. This can make the firm’s outgoings more responsive to its financial position at that point.
The timing of incoming payments matters as well. Stonebridge pays mortgage procuration fees on exchange of contracts, with payments made weekly, subject to its procuration fee payment process. This can reduce the wait between progressing the case and receiving the resulting income.
How the model supports new and growing firms
A new mortgage and protection firm needs time to form a steady flow of enquiries, applications and income. Even an experienced adviser may need several months to build a reliable pipeline after setting up a new business or moving network.
Pay as you earn allows network charges to flex with your business. As activity builds, the amount paid reflects the level of business being banked, with charges increasing in line with growth.
The same principle can help established firms planning to grow. Recruiting another adviser or investing in lead generation can create an immediate cost, while the resulting income takes longer to develop. Linking the main network charge to business banked helps prevent that cost from rising ahead of the activity needed to support it.
How pay as you earn works at Stonebridge
Our proposition works when you work. There are no monthly adviser fees or fixed adviser costs. Network charges are linked to business banked and are based on mortgage, protection and general insurance bankings only
Stonebridge also pays mortgage procuration fees on exchange of contracts and makes payments weekly, subject to the relevant payment process. Together, the charging structure and payment timings give firms a closer relationship between their network costs and the income they’re generating.
The pay as you earn model sits alongside our wider proposition, including whole-of-market mortgage access, compliance and supervision, business development, marketing assistance, training and Stonebridge’s own Revolution technology.
To discuss how Stonebridge’s pay as you earn model could work for your firm, complete our enquiry form and a member of the team will be in touch.
