Top 10 Reasons Why Staffing Companies Use Payroll Funding

eCapital Corp

Last Modified : Dec 17, 2024

Fact-checked by: Bruce Sayer

As a staffing company, your core business is to source workforce talent, your next priority is to reliably make payroll on behalf of your clients to keep that talent in place. Having the financial resources to meet this reoccurring weekly or bi-weekly obligation is one of the greatest obstacles staffing companies have to success. The staffing industry is rapidly growing, with segments such as healthcare, technology and warehousing seeing double digit increases year over year.  In this highly competitive industry, your staffing company cannot afford to delay paying wages or your reputation may suffer. To establish financial stability, a progressive number of staffing companies are utilizing invoice factoring (a popular form of payroll funding) to speed up cash flow and ensure easy access to working capital.

Here are the top 10 reasons for using payroll funding

Steady, reliable cash flow: To be competitive, your staffing company has to offer payment terms to your clients, which translates to deferred payments on accounts receivable. Waiting 30 or more days to get paid is a financial burden when having to meet weekly payrolls. A simple solution is to change days sales outstanding from 30+ days into 24 hours or less. Invoice factoring converts invoices into immediate cash, deposited directly into your account within hours of being issued.

Grow your business: Expanding operations to meet new business opportunities, or simply growing with your customers as their employment needs develop requires increased payroll funding. Invoice factoring keeps pace with growth – the more invoices you issue and the greater the dollar value of each invoice, the more access your staffing company gains to working capital.

No hidden charges: Be certain to work with a reputable payroll funding company. Factoring is straightforward, there should be no hidden fees and no surprises. Unlike a conventional business loan, there are no additional covenants to obligate actions or restrict growth. Factoring is a simple, straightforward, easy-to-manage payroll funding option.

No added debt: Using invoice factoring as your payroll funding solution is debt-free financing. You are selling your accounts receivable, not taking a loan.

Back-office support: Working with an invoice factoring company delivers much more than reliable payroll funding – it also provides back office support with cost free accounts receivable management. A trained team of professionals manage collections efficiently yet remain respectful and courteous to protect your customer relations.

Easy approval process: The approval requirements for payroll funding is much simpler, easier and faster than applying for a commercial line of credit. Because invoice factoring companies buy invoices, they consider the creditworthiness of your customers (debtors) rather than the credit history or performance of your staffing company. Whether you are a startup company with no credit history or a growing business stretching to expand, the process is simple from start to finish with first funding only days away.

Hassle-free customer service: A reputable payroll funding company will assign an onboarding specialist to walk you through the tools and work practices for fast funding. Once your account is set up, a dedicated account manager will be assigned to streamline services and ensure rapid response to any questions or issues. This single-point contact coordinates all transactions, collections and credit activities associated with your account to provide hassle-free service.

Full transparency: View, monitor and generate reports on transactions in real-time. A reputable payroll funding company will provide 24/7 access to an online portal detailing information on balances, credit limits, historical data and much more.

Establish a track record: Invoice factoring provides instant positive cash flow enabling staffing companies to pay bills on time and meet other financial obligations such as leasing, rental or debt servicing. Using payroll funding is this manner creates a pathway to build a strong credit history and open the door to future financing options.

Choice of payroll processor: A well-established payroll funding company will have systems and procedures to integrate seamlessly with varying industry platforms and protocols. Use the payroll processing company that works best for your business – your payroll funding company will tie in without disruption.

Payroll Funding is easy to manage

Here’s how it works:
Step 1: You invoice your customers and send a copy invoice to the payroll funding company.
Step 2: The payroll funding company pays an advance of up to 90% of the value of your invoice, holding the remaining balance as a reserve.
Step 3: The payroll funding company collects payment.
Step 4: The payroll funding company releases the reserve and pays the remaining balance due.
Step 5. A small fee is deducted from invoice amount.

Selecting the right payroll funding company to partner with is one of the most important decisions for your staffing company. Be careful to choose a reputable invoice factoring company with a solid history and experience in the staffing industry. Most importantly, affirm that they have the secured financial backing to uphold their end of the deal. Your payroll funding company is your financial partner – they need to be:
– Reliable
– Dependable
– Financially solid as a rock
– Ethical and transparent
– Able and willing to support you through all stages of development and situations with forward thinking, solution-focused strategies.

Use the following checklist when researching payroll funding companies:

1. How long has the financing company been in business?
2. How much staffing industry experience does the financier have?
3. What are the funding limits for your staffing company?
4. What is the timeframe from application to first funding?
5. What are the fees?
6. How much is the advance and how is the reserve managed?

Conclusion

There are numerous good reasons for using invoice factoring as your payroll funding strategy – it pays to spend the time to research the option and make an informed decision whether to incorporate it as part of your financial structure or not. The benefits far outweigh the costs, and the freedom to grow knowing financial resources grow with you is liberating. Take care of your core business, recruiting talent – your payroll funding company will ensure steady cash flow while managing your accounts receivable, collections and credit management at no additional cost.

eCapital Corp

eCapital Corp. is committed to supporting small and middle-market companies in the United States, Canada, and the UK by accelerating their access to capital through financial solutions like invoice factoring, factoring lines of credit, asset-based lending and equipment refinancing. Headquartered in Miami, Florida, eCapital is an innovative leader in providing flexible, customized cash flow to businesses. For more information about eCapital, visit eCapital.com.