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.

Alternative forms of finance such as Bank Line of Credit and Bank Loans can be difficult to obtain. If a bank loan is obtained, this may work fine while the staffing company’s costs are constant and not changing. But, what happens when new accounts are picked up and more temporary employees must be sent out? Most banks, especially in today’s climate, are not willing to increase lines of credit or grant them at all. This can prevent a staffing agency from taking on the new big contracts or expanding their operations. The flexibility that comes with factoring invoices for cash flow can allow staffing companies to grow as much as they want. When the new business comes in, they can simply submit the new invoices to cover the new costs instead of trying to re-negotiate a line of credit. It is a very easy and stress free process that makes factoring very appealing.

The appeal to factor temporary staffing invoices is also shared by the Factor. Temporary Staffing Agencies make great clients on several levels and this allows the factor to get the money out smoothly and quickly. Before any factor can send their client money, they must always verify the invoices. This can be a somewhat lengthy process for some industries but this is not so for the staffing industry. When an employee is sent to a particular job there are time sheets that show when the employee works and for how many hours. These time sheets are signed off by the manager of the staffing company’s customer and shows proof of the work being done. The factor can simply take these documents and match them to the invoice for accuracy. It is a quick and relatively low labor method of verification. This can allow the factoring company to take on new staffing clients without the worry of having to expand their own operations at the same time. It also gets the cash to the client as quickly as possible, which is the main goal of any good accounts receivable financing company.

Whether a staffing company is just starting out or looking to grow, accounts receivable factoring provides the best and most flexible way to reach their goal. The cash needed to meet payroll is only limited by the amount of invoices available for the factoring company to purchase. The cash is received right away and the employees of the agency are kept happy by getting paid timely. One of the obstacles any staffing agency faces is keeping their best employees coming back to them for more work. With plenty of cash on hand to meet payroll deadlines the agency can concentrate on growing the business and not worry about where they are going to get the money to keep everyone working. Temporary staffing agencies also make good clients for the factor. There is standard back up documentation and a steady flow of new invoices to purchase. This allows for both parties to have a smooth and successful business relationship.