Invoice factoring is a type of accounts receivable financing that converts outstanding invoices due within 30, 60, or 90 days into immediate cash for your small business. While invoice funding companies work with businesses in many industry sectors, staffing agencies are looking to invoice factoring services for help with payroll funding. According to a U.S. Bank study, 82 percent of businesses fail because of cash flow problems. Understanding the unique range of benefits that invoice factoring services can provide for your staffing agency can help you make the best financial decisions. Here are just a few ways small business factoring can help your staffing agency grow.
Staffing agencies have unique payroll funding challenges
Even though small businesses (defined as businesses with fewer than 500 employees) account for 99.7% of all business in the United States, staffing agencies have a business model that’s different than most.
Before placing a candidate with a client, the agency has to a) market its services effectively, b) pay for advertisements to find personnel and c) ensure it has enough money to make payroll. Your client is trusting that you will be able to both run your day-to-day operations and most importantly pay that person.
The client doesn’t receive the actual bill for the staffing agency’s services until the employee has worked and submitted a timecard. This process can take weeks and even months before a staffing agency will see its first payment. Established business or not, few companies can afford to wait weeks and months for payment, not when getting people paid is their primary priority.
Invoice factoring can help staffing agencies reduce turnover.
It’s been estimated that if all invoices were paid on time, U.S. small businesses could collectively hire 2.1 million more employees, which would reduce unemployment by 27 percent. This is particularly relevant for staffing companies. As businesses have the capacity to hire more staff, staffing agencies can provide the necessary contingent labor force to meet the swells in demand.
But it also means greater pressure on the staffing agency to find long-term payroll funding solutions. If you can’t pay your employees, they’ll move on to the next gig, and your client is left hanging, and you’re looking for another person AND trying to solve your payroll problems.
Remember: keep your employees, keep the contract.
If you’re looking to hear more about how invoice funding can help your business, contact Triumph Business Capital today. We work with thousands of business owners every day, providing them the working capital to make payroll and grow their business operations. We can help you, too.