Working Capital for an IT Staffing Company

The staffing industry is a field that has experienced continuous growth in recent years, and this is especially true for IT staffing companies. Every day more than 2.9 million workers are employed by staffing firms, and over the course of a year more than 11.5 million temporary or contract workers are employed by staffing companies. With IT staffing in particular, the business is projected to grow by 7% in 2015. This makes it crucial that working capital for IT staffing company needs are secured.

The Unique Working Capital Problems of IT Staffing

Working capital for an IT staffing company can be used for two main purposes. The first one is obviously for payroll. Temporary staffers expect to get paid for every week of work. And the more staffers you have as your business grows, the greater the payroll you need to meet each week.

The problem here is that your clients don’t usually pay promptly. Instead, the payment from them comes in after at least 30 days, and some could take as long as 90 days. This means that a staffing company needs to have at least enough money for 13 weeks if it is to continue its operations.

Staffing companies also have overhead costs, aside from the cost of having to screen suitable IT workers for their clients. Sometimes, the staffing company may even have to provide additional training for its employees.

But there’s also the problem of a company hiring temporary workers and then not paying the bill for those services at all. This happens in the industry, unfortunately.

How Invoice Factoring for IT Staffing Companies Solve These Problems

It’s often been said that invoice or accounts receivable factoring can be an attractive alternative to traditional bank loans. This type of funding doesn’t need security aside from the invoices themselves, and the chances of getting the necessary funding is very good compared to a traditional bank loan. And even when you get a bank loan, the entire process can be interminable, unlike invoice factoring when you know if you get the funding or not within a few days.

So if you’re unsure of meeting payroll for the week, you can get the funding you need right away and so avoid having to miss out on paying your own staff. In factoring, you can get as much as 80% of the value of the invoice right away, so you can pay off your employees promptly and also pay for overhead.

But invoice factoring offers other unique advantages when used to secure working capital for IT company needs. For one, staffing companies don’t need to hire additional workers to collect payments from clients. Often, this task falls on the lender instead. Factors can even investigate new clients to see that they’re in good financial health and that they have a good history of paying staffing companies on time.

In factoring, working capital can be secured quickly and other conveniences are also offered.

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Chris Lanchech

Hi everyone, my name is Chris and I am a junior analyst at Neebo Capital and an inspiring blogger. We enjoy speaking with business owners and entrepreneurs who come to Neebo Capital looking for cash flow solutions. Give us a call toll free at 1-888-382-3766 or Visit us online at www.neebocapital.com

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