Every year, staffing agencies employ roughly 17 million temporary and contract workers at roles in private and government sectors. Staffing agencies require capital for marketing, expanding into new industries, sourcing talented specialists, paying employees, and courting larger contracts. Yet with the lag between invoices and payments from clients, finances can experience downward pressure that can throw operations off balance and lead to bankruptcy in severe cases. Luckily, there are ways to achieve better parity between invoices and revenue.
Contracts and Payments
When staffing agencies sign a contract with a client and send employees to fill roles, payments are staggered by periods ranging from 30 to 90 days. While waiting for payments, staffing agencies still need to make payroll and cover overhead expenses. An agency could have roles filled at dozens of organizations and still experience a strain on finances because payments haven’t been received yet from clients. The issue can become more severe in agencies that fill highly specialized roles, where staffers get paid at higher rates than most on a weekly or bi-weekly basis.
Staffing agencies may be tempted to use short-term loans to even out revenue cycles, but the added debt can further impact finances. Additionally, taking out loans for recurring cash flow issues can flip finances upside down. Fortunately, there is a way to improve cash flow and keep all your bases covered without taking on unnecessary debt.
How Staffing Agencies Can Achieve Better Parity
Instead of waiting on staggered payments or using short-term loans, staffing agencies can use accounts receivable financing to achieve a faster turnaround time between invoices. Accounts receivable financing is a method by which unpaid invoices are exchanged for cash, less a slight discount. When a staffing agency submits an invoice, funds are typically made available within a single business day.
Because accounts receivable financing is categorized as a transaction instead of a loan, staffing agencies do not take on any debt and they are able to preserve their credit ratings. This allows agencies to improve cash flow, pay their employees, source talent, and expand to take on larger client accounts. By using accounts receivable financing, a staffing agency can eliminate gaps in revenue from unpaid invoices and reduce the need for loans. Accounts receivable financing offers non-recourse funding, so even if your clients are late on their payments, your agency will still receive money.
Get the Solutions Your Staffing Agency Needs
Web Finance Direct provides a wide range of working capital and growth solutions for staffing agencies of all types. We understand how crucial it is to maintain a healthy cash flow, which is why we offer accounts receivable financing nationwide. If you run a staffing agency and want to get faster access to revenue, contact Web Finance Direct today. Our team of experts will work with you to create a solution scaled to your needs so you can access funds from your unpaid invoices within 24 hours.