Many staffing companies or temp services offer different programs and options for their customers. One of the more common options is for a business to have a contract with the staffing company to provide fill-in short and long-term employees on an as-needed basis.
When this happens, the contract usually has monthly or quarterly billing with 30 to 60-day terms. This potentially causes problems for the staffing company as there can be two to three months where they have to pay their temps but are not getting full payments from their customers.
This can become even more problematic in providing temps to many different businesses on these arrangements if they are not staggered, so at least one big contract is paying per month. Getting around this problem is simple if you use financial factoring companies with an understanding of the staffing industry.
Addressing Cash Flow Gaps
By using the services of financial factoring companies, your staffing agency can access funds in advance of customer payment. The factor advances up to 80% of the value of the invoices you choose to sell.
The factor then collects from your customer, eliminating your need to send reminders and chase payments. Once the invoice is paid, the factor deducts their fees from the withheld 20% and forwards the balance to your account.
With the use of financial factoring your staffing agency is able to:
- Immediately have cash on hand to make payroll
- Retain top employees by providing bi-monthly or weekly payroll that is never late
- Hire new employees to expand your staffing services or specialize to fill the needs of a particular contract or new staffing opportunity
- Advertise, recruit and market on an ongoing basis
It is also possible for a staffing agency to use a factor to handle all of their accounts receivable. This may be very helpful for a small or startup company where hiring accounts receivable staff may not be a practical option.