There are various financial burdens associated with acting as a middleman between employers and workers. For that reason, staffing companies generally consider all available financing options.
Everybody wants to be paid in full and on time, especially your workers. Unfortunately, when your customers are working on delayed payment terms, this makes it difficult to keep up. This forces you into a balancing act that’s critical to your company’s long-term success.
Our ultimate guide to invoice factoring for staffing agencies includes all the information you need to make an informed decision for your business.
Staffing factoring is a type of invoice factoring that allows staffing agencies to get paid faster on invoices from customers. In exchange for a small fee, your company can receive the majority of the money due without the wait. This goes a long way in improving cashflow.
Consider the challenges associated with waiting 90 days or longer to receive payment from your customers. Now, consider the benefits of receiving payment the same day you submit an invoice to a factoring company. Not only does it improve your cashflow, but it also removes some of the financial-related stress associated with your staffing company. Invoice factoring ensures that you can issue checks every payday no matter how large your payroll becomes.
Both staffing agencies and factoring companies benefit from staffing factoring. Rather than waiting indefinitely to be paid, the staffing agency is paid immediately. As a result, staffing factoring companies receive a fee in exchange for "fronting" the money.
The staffing factoring process is as follows:
Once you have an account set up, it’s time to submit your invoices. Most companies allow you to submit as few or as many invoices as you want. You’re under no obligation to submit every invoice.
You’re then charged a fee for each invoice you submit. Your fee is dependent upon two factors: the volume and your industry. Understanding what you get in return for your fee will help you understand why factoring is often the best approach.
There are two basic types of factoring: non-recourse and recourse.
Recourse factoring is the most common. In short, your company agrees to buy back any invoices that the factoring company is unable to collect. In other words, if your client doesn’t pay, you’re eventually responsible for buying back the invoice.
Non-recourse factoring puts more risk on the factoring company. With this, they assume the risk of non-payment by your customers.
While it doesn’t hurt to compare both options, recourse factoring is by far the most common. Non-recourse factoring is more restrictive and more expensive, thus making it a challenge to fit into your current financial processes.
You’re always looking for a competitive advantage for your staffing agency. This can be the difference between success and mediocrity.
Here are the top benefits of factoring for staffing agencies:
These are some of the most powerful benefits of staffing agency factoring, but you’re likely to find others as you move through the process of factoring.
Comparing and choosing a staffing factoring company can be challenging. You can’t trust just any company with something so important. You need to find a reliable and trustworthy service provider.
Here are some of the top traits to look for in a staffing factoring company:
Don’t hesitate to reach out to any provider you’re considering. Ask them questions, request more information, and talk through the application process.
Factoring companies are in the business of collecting invoices on your behalf. For this reason, they must carefully calculate risk before taking on a staffing agency as a client.
The first thing an invoice factoring company will do is collect all the prerequisite information. This gives them the information required to calculate risk, which in turn impacts the final decision to approve or deny your application.
They calculate risk by reviewing details such as:
You want your staffing agency to be considered low-risk. This improves the odds of approval, which allows you to immediately begin factoring invoices.
Most factoring companies make it simple to apply online. This streamlines the process, providing the opportunity to get started sooner.
In addition to basic contact information, the application process generally entails the following:
Note: A factoring company may request additional information to process your application. Standby prepared to provide anything that can improve your chance of approval.
Qualifications vary from one factoring service to the next, but here are some of the most basic:
Additionally, some factoring companies only work with clients in specific parts of the world, such as North America. This is often necessary to make collecting invoices easier.
Modern businesses need speed and flexibility to succeed. With factoring at the heart of your business model, you can shorten payment periods, reinvest in growth, and forget the hassle of collecting invoices. If your staff can’t wait for payment, why should you?
We process approximately 4,000 invoices per day, have 1,400+ active clients and fund more than $3 billion annually. REV's people-first approach to factoring means having a finance partner that's there for you the whole way.
If you’re ready to get started, apply online, contact us via email (firstname.lastname@example.org), or dial 855-879-1511. One of our experienced invoice factoring professionals will answer your questions, walk you through the application process, and ensure your staffing business succeeds with invoice factoring.