Factoring Is The Cash Flow Solution To The Staffing Industry

Invoice factoring is one of the oldest forms of business finance. There are certain industries that are a perfect fit for factoring and one of them in particular is the staffing industry. Cash flow, gets held up because money goes out much faster than it comes in. This rings especially true with temporary payroll staffing firms because payroll is their primary cost of business and they must meet it every week regardless of if they get paid for their services or not. This constant weekly need can create a gap in their cash flow and this is where the factoring company can step in and provide an essential service.

The biggest obstacle facing staffing companies is having enough cash flow on hand to meet payroll. When a worker comes to one of these agencies for a temporary position, whether as an office worker, accountant, nurse, or a laborer, they expect to be paid every week. In some instances in which the job only lasts a day or two, these temporary employees want to be paid immediately. That creates a cash flow squeeze when the agency’s customers pay in 30 to 45 days. This is where accounts receivable factoring to staffing agencies can provide the working capital needed to keep up with current payroll costs and also provides room for any potential growth.
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How to Recognize a Doable Deal and Increase Your Closing Ratio

There are thousands of great deals out there. Many companies are unaware of the numerous types of financing available to them that banks don’t usually offer. We want to find these companies, educate them about the financing available, and fund them. Unfortunately, we often get caught up in deals that can’t be funded but don’t figure it out until two weeks of work have gone by. This ties up valuable time that can be spent pursuing profitable deals. Let’s explore a sample of common obstacles we often encounter.

I have one of the toughest roles in invoice factoring and purchase order financing. I do the underwriting for Paragon Financial Group. Cash Flow Consultants love me when I approve their deal but often misconceive me as the bad guy when I decline their prospect. However, after over 13 years in factoring, I know what can be factored, and which deals to pass on. This has been learned through my making many mistakes over the years as well as good decisions. This is the less glamorous side of factoring but perhaps the most important one.
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How the Down Economy Has Positively Affected the Factoring Industry

The current consensus in the factoring industry seems to be that the lower debtor quality is greatly influencing receivables financing. As factors see increases in invoice turnover, risk of bankruptcy by customers, concentration, and decreases in debtor credit, it may look like troubling times for invoice factoring. That being said, there are “diamonds in the rough” that can be positively looked upon by factors. As long as the factor holds tight to sound judgment, remains conservative, and uses the core principles of receivable financing, they can take certain advantages that is positively affecting the factoring industry given the current economy.
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