How Invoice Factoring Companies Can Benefit Temporary Staffing Agencies
Waiting for invoices to be paid can really put a crimp in a business’s cash flow. This is an all too common issue for temporary staffing agencies. In most cases, agencies don’t get paid until a qualified candidate has been placed and the work has been performed. To make that happen, time, resources and capital are expended before payment is received. This can sometimes leave an agency struggling to meet daily operating expenses, especially newer or smaller agencies. Invoice factoring companies can help temporary staffing agencies meet those expenses while waiting for invoices to be paid. Using factoring to avoid a working capital shortfall offers many benefits that can help a temporary staffing agency grow and remain competitive in the industry.
Increase Working Capital
Having enough working capital is a top concern for every business, not just staffing agencies. Utilizing factoring is a great way to increase that capital quickly and efficiently instead of waiting for invoices to be paid. Invoice factoring companies purchase an agency’s outstanding invoices. The agency typically receives 70 – 90% of the face value of the invoices purchased, providing them with immediate capital to keep their business on track. The factoring company then assumes the responsibility of collecting payment on those invoices. Once the invoices are paid, the agency receives the balance of their face value minus a fee. While it’s important to understand the fees before taking advantage of factoring, they can often be a small price to pay to keep your agency running smoothly.
Funding Without Debt
Factoring is not a loan. Invoice factoring companies simply provide agencies the money that was already owed to them but in a timelier manner. This allows you to obtain the working capital you need when you need it – without the wait. The factoring company assesses the credit history of each client for which you submit invoices but if any one of them default on payment, you will be responsible for paying the factoring company the value of the invoice.
Meet Operating Expenses
While waiting for invoices to be paid, it can become difficult to keep up with operating expenses. Most importantly, you need to be able to meet payroll. Even for a staffing agency, finding hard-working, qualified employees can be tough. Retention and turnover is always a concern but it becomes an even bigger challenge if you are late with paychecks. Having to wait for their payment can cause employees to become disgruntled and develop negative attitudes about their jobs and the agency itself. This could cause expensive turnover and, in today’s world of online reviews, cause the agency’s reputation to be damaged.
While you may have sufficient working capital to meet operating expenses, there often isn’t enough left over for expansion and business growth. Working with invoice factoring companies is a great option for expediting revenue from outstanding invoices. This can be used for planned growth such as expanding into new markets or opening a new location. Invoice factoring can also help you seize an unexpected business opportunity instead of letting it pass you by due to lack of capital.
Invoice Factoring Companies – How to Choose
There are many invoice factoring companies to pick from, so how do you choose? Entering into an invoice factoring agreement is just like entering into any business agreement. It’s important to do your due diligence and make sure you choose a reputable company that offers factoring that fits your needs.
Capflow Funding Group will work with you to find the best funding solution to provide your business with immediate working capital. We service many different industries with a variety of different funding needs. Contact us today and find out how invoice factoring can help grow your small business.