![]() How Staffing Factoring Can HelpĪs you have likely already experienced, it is impossible to predict when your invoices will be paid, due to the unpredictability of client payments. This fee will be based on the size of the invoice and how long the invoice is expected to remain unpaid. Once the factoring company receives payment from your customer, the factor will then take their fee and forward you the balance. If you need to, you can even submit new invoices during this time for further funding. While the factoring company works on collecting payment from your customer, you conduct business as usual. (The initial advance rate is ultimately determined by the size of your transaction and your industry.) The Factor Collects Payment The factoring company then quickly gives you an initial advance of funds -up to 95% of the invoice. Your business submits and sells its outstanding invoices to the factor. Once approved, a contract is signed between you and the factor detailing the rates and limits. The next step is to complete an application and partner with a factoring company. ![]() For the invoice to qualify for factoring, the invoice must be payable within 90 days. The first step in the process is to invoice your customer for the services fulfilled. There are typically five steps in the invoice factoring process: Invoice Your Customers One of the biggest advantages of using invoice factoring is how simple and straightforward the process is, especially compared to the tedious application requirements of traditional lending options. Invoice factoring is not a loan, so there is no debt (or interest) for your business to repay. ![]() The fact that your business is being provided money it has already earned for its immediate cash needs has also made factoring a very attractive cash solution. The factor will then quickly advance 80% to 95% of an invoice’s value, known as the “advance rate”.īecause you are selling the unpaid invoices, the factoring company assumes the responsibility for collecting on the invoices. Essentially, your business is selling its accounts receivable, also know as invoices, to the factoring company at a discount. Factoring invoices allows your staffing agency to use outstanding invoices to generate cash fast. What is Staffing Factoring?Īs your firm expands, you will need to find a flexible financing solution that helps you manage growing overheads and quickly fulfill new and larger contracts. Meanwhile, customers expect placements to be filled within days this puts a lot of strain on your cash-strapped firm to recruit, onboard and pay workers, all within just a week or two. The costs of administrative operations like employee onboarding, timesheet management and payroll processing can add up quickly as your business grows. Without sufficient working capital, your staffing agency will struggle to overcome the challenges of expansion. For a business whose primary focus is getting people paid, this obviously creates a big cash flow problem. Unfortunately, this process can take weeks, or even months, before your agency receives its first payment. For example, your client does not receive your agency’s bill until the employee has worked and submitted a timecard. Staffing companies have a business model that is different than most small businesses, which means they face unique payroll funding challenges. As a result, many staffing agencies regularly turn to factoring companies to overcome their cash flow issues. Staffing agencies recruit for a wide variety of positions and serve many different industries, which means their invoices are often paid at very unpredictable times. Invoice factoring is a financing tool used by many different business types, including staffing agencies, to convert unpaid invoices into immediate working capital.
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