Are you a small business owner struggling with consistent cash flow? Do you have several invoices, and waiting for the payment date seems to take an eternity? Invoice factoring is your ideal financial option to meet your short-term financial needs and sustain your transactions. Invoice factoring is an option you can explore when your clients’ invoices have to wait for 30, 40, or 60 days before being paid.
Invoice factoring is an option for companies dealing with goods or providing services. It helps those working in the staffing sector who have to wait for their clients to pay.
Challenges in staff hiring companies
Staff hiring companies help other organizations place employees in various sectors, including construction, manufacturing, healthcare, human resources, and others. The staffing company must take advantage of peak seasons when organizations require new employees. However, some opportunities may come when the company is low on cash.
A lack of adequate cash flow because of pending invoices can delay payroll processes. Consequently, it can affect your employees’ productivity.
Enter invoice factoring services
An invoice factoring company is a third-party financier that lends you money on the strength of your invoices.
How does invoice factoring work?
Invoice factoring is a straightforward finance option. First, the customer receives services from the staffing company. However, they give the hiring company an invoice instead of paying cash. The hiring company receives the invoice from the factoring company in exchange for a cash advance. The money given helps the hiring company service their payroll and sort out other short-term financial responsibilities.
When the client’s invoice is due, they pay the invoice factoring company and not the staff hiring company. Consequently, the invoice factoring company gives the staffing firm the rest after deducting a small service fee.
What to expect during the invoice factoring process
Invoice factoring provides cash flow in hours. It is incredibly convenient for small business owners with at least ten customers.
- Your present your invoice for approval by the factoring company. You should expect at least 85% of the total value of the invoices you surrender.
- You will receive the remaining 15% when your client pays. However, this amount will be less factoring in the application fee.
- The staffing company’s finance department can view all the invoices online. Consequently, your department has real-time updates on the status of the pending invoices.
- An invoice factoring company can automate the process to match your needs. For instance, the factoring company can avail cash in time so you can pay your employees promptly.
- Invoice factoring is a timely option for staffing firms because one can decide how long they need the services. Factoring partnerships are short-term and do not attract any charges if you opt out of the process.
Benefits of invoice factoring companies for staffing agencies
Invoice factoring is a convenient financing option for all sorts of businesses. The leading benefits of invoice factoring include:
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No interest is charged
Invoice factoring is a short-term solution to financial needs. Securing a bank loan can be a daunting task and can be unrealistic for small businesses. Further, the money advanced by the bank attracts interest. Business invoice factoring provides money in hours for a small service fee. The reasonable service charge makes factoring a better option for small entrepreneurs.
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Provides cash flow on short-term notice
Any staffing agency can receive cash if they have invoices. Consequently, your business can access cash within hours of giving your invoices to the factoring company. Invoice factoring provides money to bridge the cash flow crunch experienced when one has to wait 30, 45, or 60 days before paying for services rendered.
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Allows firms to concentrate on growth
The need for sufficient cash flow can slow the growth of a staffing agency. However, invoice factoring removes your cash flow worries, allowing you to concentrate on hiring, training new staff, and pursuing new contracts. The staffing agency has time to focus on the future of the business and stop worrying about short-term financial needs.
Take away
Invoice factoring is a short-term financing option for small businesses. It thrives on the strength of the invoices provided by your clients. The staffing company has a constant cash flow to bridge temporary financial needs. Pleasantly, you can opt out of an invoice factoring arrangement when you wish to end the relationship.
