3 Benefits of Factoring for the Staffing Industry

By its very nature, running a staffing firm almost requires working on an invoice basis. You need to collect employee hours and bill for them, and you can only do that after the fact unless you have a very unconventional pre-pay model for your services. While you might require a deposit or retainer for a large contract, you’re still typically relying on an invoicing system to bring in the rest of the fee after you’ve firmed up the actual staff count and tracked their hours. Being an invoice-based business can mean taking on cash flow challenges that other companies avoid, but luckily it also means you have access to tools that only companies like yours can use. One of them, factoring, provides the staffing industry with flexibility when it comes to unpaid invoices as they age.

Grow Your Business

Factoring is similar to invoice financing in that you are turning over collection to an outside agency and taking a partial payment, defined as a percentage of the face value of the group of invoices you factor. That’s where the similarities end, because factoring is a permanent offloading of your old invoices. As a result, it brings a little less money in than financing them, but it also closes that invoice and allows you to move on without having to pour more resources into collections. Having a plan for gracefully dealing with these aging invoices before they become a resource drain means having more money to grow your business, both from the savings and from the payment you get from the factor.

Outsource Repeat Billing

Reducing the amount of time your financial staff spends on follow-up billing and drawing firm boundaries around how many times they have to revisit each invoice means more than just saving resources, it also means streamlining your staff, focusing less on billing and more on staffing industry specific concerns. That means more detailed financial projections, better resource allocation recommendations, and a more efficiently managed company.

Capital Without Debt

When you sell your invoices, you’re letting someone else take responsibility for them. You’re also entering into an agreement that leaves your customer on the hook for their debt to you, but doesn’t create new debt to a third party. That’s the biggest difference between factoring and asset financing based on invoices. As a result, your credit score doesn’t matter when a factor is calculating the deal. If anything, your customers’ credit scores do. It also means that if you want to avoid adding new debt, you can use it to raise working capital while keeping your credit situation as it is.