• Accel Business Funding

Why Staffing Agencies Should Use Invoice Factoring Now

Staffing agency employees comprise a sizable portion of the workforce. In California alone, nearly 3 million workers are employed by staffing agencies, with around 500,000 temporary staff being hired by customers every week. However, maintaining payroll costs can be a difficult task for any agency, as employees need to be paid every week, yet invoices from an agency’s clients are paid out over the course of 1-3 months, a length of time that may be further extended if the client has difficulty paying on time. This delay has worsened to a greater extent than usual because of the COVID-19 pandemic. This time discrepancy causes major strain on a staffing agency’s cash flow, in which agencies are responsible for paying thousands of dollars before clients fulfill invoices. In addition to losing out on opportunities for growth and profits, the pressure of insufficient working capital can push agencies into unsustainable business practices.

Working Capital Issue for Staffing Agencies

Before placing a candidate with a client, a staffing agency has to:

  1. Market its services

  2. Pay for job opening advertisements to find the right job candidate

  3. Ensure it has enough money to make payroll on a weekly/biweekly basis

The client of a staffing agency typically receives the bill for the agency’s services only after the selected candidate has been hired and starts working. This means that it could take weeks or months before the staffing agency receives its payment. Few companies can afford to wait for such an extended period of time, and staffing agencies are no exception. This cash flow timing issue is the reason why staffing agencies turn to invoice factoring: to ensure they have sufficient working capital immediately.

Why Invoice Factoring Will Help

Factoring companies can solve a staffing agency’s cash flow problems by purchasing outstanding invoices, providing immediate funds to the staffing agency. This helps staffing agencies secure sufficient working capital and meet their short-term financial obligations such as payroll.

Once the invoices have been purchased, the factoring company assumes responsibility for collecting invoices from the staffing agency’s clients. With a reliable cash flow and not having to worry about invoice collection, staffing agencies can thrive and now focus on growing.

Invoice factoring is the best alternative funding option for staffing companies, especially in the COVID-19 economy. Accel Business Funding has worked with many staffing agencies and can provide invoice factoring services tailored to the needs of your agency.


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