 All businesses face alike problems in managing their accounts receivables and cash flow, but for staffing agencies a slow payment is a particular problem. They have to pay their people long before they see any money coming in from customers.
And that fact that the clients aren't solvent is not the reason. On the contrary, they are often some of the largest, most financially sound, companies around, but their corporate policies dictate that they pay on set schedules - often 60 days or longer. In this way the "cash gap" is created that is so familiar to many agencies. While you are expected to wait patiently for your money, your employees and suppliers expect to be paid right now. You need to get cash. But where can you find it?
The first thing that comes to your mind is usually the bank. They are going to want personal guarantees even if you can qualify for a traditional loan. And the amount is going to be immutable, because it will not vibrate automatically with increases in the sales you invoice.
A factoring company – it can help you in this situation. A factor will purchase your accounts receivables and provide an advance payment up front. In this way, a business can produce instant working capital, and the amount available is tied directly to the level of business being done. The factoring company uses the credit standing of the customers to determine the facility provided, not the staffing agency's credit rating. And there are not any personal guarantees.
The left-over of the invoice amount is paid when the invoice is collected. There will be a service fee payable on the amount collected. But that is negotiated independently with each agency. It is usually a small amount, and well rewarding when weighed against the benefits of immediate cash flow.
The factoring company is responsible for the collection of the money if the invoices have been issued. It is approached in a professional and friendly way. They always present your company in the best light. Keeping your customers happy is at the forefront of their objectives. But, because this is their full-time role, they are generally much better at getting paid quickly than the agency itself.
Factoring provides access to immediate cash for working capital, and relieves the management burden of cash collection. That's why it is no wonder that US factoring companies handle over $115 billion a year in invoices! So, you may see that factoring is the very best solution for temporary staffing agencies.
| 
