Invoice Factoring for Temporary Staffing Companies
The popularity of staffing firms has grown exponentially in recent years. Companies are increasingly looking to hire temporary workers in order to better manage their costs. However, rapid growth and a lucrative market also mean increased competition, and the battle to stay ahead of the game is often hindered by how difficult payroll expenses make it to remain sustainable.
With payroll being such a major expense in the industry, temporary staffing agencies need substantial cash flow to ensure that all their employees are paid on time. Invoice factoring for temporary staffing companies can help you secure the working capital you need to cover payroll costs, expand your recruitment pool, place better candidates, and cover any other operating expenses.
Temporary Staffing Factoring vs. Bank Loans
One of the most prevalent challenges for temporary staffing agencies is managing their cash flow in order to pay staff. Temporary employees are typically paid weekly, but the clients that staffing firms work with may have net 30 or net 60 payment terms. So it is up to the staffing agency to manage their capital in a way that allows them to meet payroll deadlines while they wait for client payments. This is where traditional loans and lines of credit fall short in terms of financing. Aside from the strict application requirements, even the most successful agencies may end up waiting months for their loan to be approved and eventually paid out.
On the other hand, temporary staffing factoring allows staffing agencies to sell their open invoices to a third party for an advance on their value. Approval is almost instant, and the funds are typically paid out within as little as one to two business days. Invoice factoring for staffing agencies fills cash flow gaps by giving fast, steady working capital and financial freedom to take advantage of seasonal hiring spikes, recruit better candidates, extend more generous payment terms to clients, and still cover payroll without hassle. Plus, factoring fees are much lower than the interest rates on bank loans, making accounts receivable factoring a much more affordable option for staffing agencies.
Top Financial Challenges in the Temporary Staffing Industry
Staffing firms face constant changes. New technologies, a limited supply of skilled workers, economic uncertainty, diversity initiatives, working remotely, high employee turnover rates, etc., are just some of the challenges they face. Aside from the frequent payroll challenges staffing agencies face, here are some of the biggest financial challenges facing staffing firms.
How to Run a Successful Temporary Staffing Company
Despite how the staffing industry has evolved over the years, the main goal of temporary staffing agencies remains the same – providing companies will skilled employees and qualified laborers to work on a temporary, temp-to-hire, or seasonal basis. When managed properly, a staffing agency can be very profitable and offers a lot of opportunities for growth; you just need to know a few basics:
Financing Options for Temporary Staffing Companies
Once all of your clients have settled their accounts, the factoring company will reimburse you the remaining balance, less their fee. Factoring fees are low and designed to be competitive, plus you can factor as few or as many invoices as you would like. Qualifying is easy, even if you have poor credit, because the factoring company is more concerned with how likely your customers are to pay.
If accounts receivable factoring sounds like a good option for you, you need to make sure you choose a factoring company that understands the ins and outs of the staffing industry, so they are equipped to handle the unique challenges your business faces. Find out how to compare industry-specific factoring companies using our Factoring Guide or request a quote through Factoring Companies Canada for help choosing the best staffing factor for your needs.