The financial choices you make during the early stages of your staffing firm are critical to its growth, and among those choices is how to fund payroll.
Your first instinct may be to look to banks as a payroll funding solution. But the long application and approval processes, many fees, and strict covenant requirements typical of traditional funders can stifle a fledgling firm’s growth, making it difficult to invest in your new business. You might also consider addressing cash flow issues with small business credit cards, but high interest rates and limited credit limits can put a crimp on growth-driven spending.
Instead, consider working with a payroll financing company that specializes in payroll funding for staffing firms. A payroll factoring company understand the specific challenges firms face, such as the cash flow gap. Payroll factors understand that your temporary employees are often paid weekly, while your customers might not pay for 30 to 60 days or more. Factors can make money available the same day invoices are sent so that new firms can cover employee wages.
After the deal
While negotiating deals with potential customers, creditworthiness might not be at the top of your mind. However, customers that can’t pay or are likely to go bankrupt mid-contract does little for your growing firm. Evaluating the credit of potential customers, then, is a valuable step, and one that can be done by a full-service payroll factoring company.
Factoring companies can monitor and report on the credit ratings of existing and prospective customers, providing Dun & Bradstreet credit reports and credit monitoring services that could save you from losing thousands of dollars. It’s an early warning system that allows you to reach out and better understand the issues of existing customers and how they might be resolved, or take steps to protect yourself from customers that can’t make good on their debts.
There are also factoring companies that offer services such as cash on delivery, which holds payroll checks until payment for services is made to help you retain business with customers that might be experiencing credit issues.
There are other ways full-service payroll funding can save new firms money. For example, they can provide back-office administrative services such as processing payroll and billing, filing payroll taxes, managing collections, and providing front and back office software. Outsourcing these services not only means there’s no need to tie yourself up with those responsibilities, it also means you can save money by not having to hire a full-time staffer to manage those duties. The time saved not doing administrative work can be invested in prospecting, or in interviewing new temporary employees to add to your growing roster.
Firms that take advantage of full-service factoring companies dedicated to serving the staffing industry have a partner that understands what goes on behind the scenes of staffing firm. That means you spend less time in front of a computer doing mundane tasks and more time strategizing and networking. And that means your business has a better chance to grow and thrive.