Frequently staffing companies have invoice factoring companies assist in growing their business. With increased labor you can get a headache from lack of cash flow as bigger contracts are signed and more staff is placed. But you may benefit by factoring those invoices to meet weekly payroll. It’s an acceptable method to get through a growth period. Typically, well run staffing firms have excellent profit margins so the nominal financing charges are not going to be a burden on the bottom line. Especially when you consider how many new employees you can place knowing that payroll is available when you need it.
On the other hand, permanent placement invoices are not as easy to finance. With temporary staffing once the hours are logged, the customer owes on the invoice usually without challenge. Permanent placement contracts have language that allows the customer to reject the candidate over a set period of time, thereby offsetting the outstanding commission. Now we always hear that it never happens, but the point is a fundable invoice has to be due and owing without clauses that allow the customer not to pay.
Because it is so simple to use, easy to set up, and a ready access to capital, accounts receivable financing is a trusted tool of the temporary staffing industry.