What is staffing factoring?
The staffing industry is responsible for supplying much-needed resources to different businesses of varying industries. This could be in the form of permanent, contractual, or temporary employees. The industry plays a crucial role as it provides businesses with the right candidates with the right skills for the right position.
The staffing industry relies heavily on a healthy cash flow for its smooth operations. Due to having many employees to take care of. However, like any other business, it needs to wait to collect its receivables from business customers for the business to move. In certain cases, it takes a week or more, or even months, before payment comes in, jeopardizing the cash flow. As a business owner, you don’t wait for this to happen – this is where staffing factoring plays in.
Staffing factoring is the process where staffing companies sell their outstanding invoice (also called “payroll funding”) to have cash in hand to deliver essential business needs and even improvement projects.
Requirements for staffing factoring
Not all industries and businesses are eligible for staffing factoring. There are certain requisites to be able to qualify, such as:
1. A proper record-keeping of invoices to demonstrate good file organization.
2. Having customers with good credit scores to show that you have good-paying clients who can meet their obligation in the invoice.
- 3. Good customer support system that is responsive to queries. Not only from the factoring company during credit check but to queries of customers regarding their accounts.
These are but a few of the basic requirements. Different factoring companies have different policies, so it is best to check on them first to be able to be fully compliant.
Advantages invoice factoring brings your staffing agency
There are many advantages of invoice factoring for staffing companies. To help convince you, here are a few of the benefits of using invoice factoring:
Increase working capital to meet expenses
Availing the service of a factoring company gives your business additional budget that provides more elbowroom for your business. The additional budget can be used as an additional working capital to pursue other plans for the business.
Business growth opportunities
As funding increases, so does the opportunity for the business to grow and expand. Having a good cash flow can give your business the security that the expansion that you have in mind can be executed. May it be in the form of new equipment, another line of product or service, or the opening of another branch.
Getting your invoices paid in days
Instead of waiting for the duration of your invoice, which usually lasts 30 to 90 days, you can get paid sooner. Once the factoring company that you applied to approves your application, you can be paid in the next few days.
What is the process of obtaining staffing factoring services?
Factoring companies pre-qualify businesses that apply for staffing factoring by assessing certain documents. These documents will help you secure the much-needed approval, so it is best if you prepare them. Accomplish the factoring company’s application form. Properly fill in the application form and provide the details requested. Remember to be truthful and as detailed as possible with the information that you will provide to make the credit check much easier.
Additionally, be prepared to provide a copy of your customers list if it is requested. Once you passed the screening, invoice factoring takes place. The factoring company then pays the business the percentage of the face value of the invoice. Upon full payment of the invoice, the factoring company releases the remaining amount. Then, deducts a certain portion as their fee for advancing the amount.
CapFlow has an experience working with different industries and believes in the benefits that invoice factoring brings to your business: a more robust and solid cash flow.