Staffing companies are seeing steady increases in demand as the American economy continues to recover and companies respond by hiring new staff to meet their own increased business levels. But staffing companies themselves took a direct hit with the economic crisis, as businesses in every industry enacted massive spending and hiring freezes in response. Those staffing companies that have managed to stay in business are now seeing the potential to capitalize on the recovery and move toward a more stable existence.
Most staffing companies function on a basic model:
- They hire staff to work for customers’ companies.
- They directly pay the staff they’ve hired, typically on a weekly basis.
- They invoice their customers’ companies.
The end result for staffing companies is that, while they’re seeing a marked increase in hiring opportunities, they’re also seeing their costs go up exponentially as they pay out to new hires while waiting anywhere from 30 to 90 days for the new hires’ companies to remit payment on their invoices. This is where invoice factoring services come in.
Invoice factoring services, also called “accounts receivable factoring services,” are a particularly beneficial method of small business financing for small staffing companies experiencing cash-flow challenges as business picks up. Instead of waiting on customers to pay their invoices (and spending time and money managing those accounts receivable), staffing companies can sell their outstanding invoices to invoice factoring companies for payment within days. This helps them meet payroll, increase marketing efforts, and take on more customers as they’re better able to budget, plan, and keep up with demand.
For those staffing companies that experienced credit challenges during the recession or those just opening their doors, invoice factoring services are a great option. Based on the creditworthiness of the debtor (in this case, the company requesting new staff) and the value of the related invoices, accounts receivable factoring services are an accessible, fast, reliable alternative to costly small business loans. Invoice factoring creates no debt, making it a conservative, sound option for both start-ups and seasoned staffing companies alike.Disclaimer: The information presented above is general and intended for educational purposes only. It is not a substitute for practical legal or accounting advice on any specific situation.