If you are an owner of a staffing company, you must understand the financial situations that come up quite often. Things definitely do not go in the positive direction financially when you have a huge workforce working for you. It’s trickier if your resources are people. You simply cannot delay your staff’s payments, but your clients can pay you late. In such situations, the concept of staffing factoring can come to your aid and ensure the required cash flow.
What is the concept about?
Understand this by considering a scenario. Say you provide staff to a shipping company. You have sent 50 workers who expect $50 from you at the end of the day. That means, from the shipping firm, you are to receive a net amount of $2,500 every day so that you can pay your staff’s wages.
Now, say your client contacts you and requests for a payment delay of 7 days. This means that you will receive a total of 7*2500 or $17,500 after a week. Accordingly, you will also have to ask your staff to wait for 7 days for their payments as your client has delayed. They will have to work for the next 7 days without pay and will receive $350 each after a week. Will this work with you?
No! You are bound by contract to pay your staff daily. You simply cannot breach that. It is now when you contact factoring companies for staffing agencies. They pay you the required $17,500 over the next 7 days so that you can continue your workflow.
How exactly does staffing factoring work?
When you contact a factoring firm, you need to present an invoice. Based on this, the agency sanctions your payment. When you agreed to provide the shipping company 50 employees, you must have had some sort of an agreement paper where you had details of the contract. You will have to put down the fact of $50 per day to each worker there. Factoring temp staffing agencies sees this.
They run a quick credibility check of your business. Then, they either pay you directly, or transfer $50 to each staff directly every day. When your client gives you $17,500 after a week, you simply pay the amount back.
Why do they help?
Staffing invoice factoring helps both you and the firm. Of course, you don’t take exactly $2,500 from the shipping company. You must charge a certain percentage as commission. Similarly, when a factoring company is lending you money, they will also charge a particular rate of interest.
What’s important here is that your cash flow remained intact. You just avoided a financial crunch situation or a probable employee revolt by ensuring your staff their daily wage. All that was required of you was a mere rate of interest that prevented your business from shutting down.
Is it a great option then?
Certainly! At times, it takes mere 24 hours to approve your loan and get on with the process. If all your papers are clear and your business legit, there is no reason for a staffing factoring company to reject your request. Make the wise decision and clear every financial hurdle in your business’ path.
INDULF-ALEXANDER BRICE is the author of this article on Factoring companies for staffing agencies. Find more information, about staffing invoice factoring here