If you run your own technology staffing firm, sooner or later you may run into some problems with your cash flow. Most of your overhead is payroll since you are in the business of providing companies with workers. Each one of those workers usually expect to receive their wages on a weekly basis. But the problem is that your customers will often pay after 30 days. Some may even pay after 60 days. And that’s why factoring for technology staffing firms can be a lifesaver.
How It Works
You can add funds to your cash reserve and boost your cash flow easily with factoring for technology staffing firms. The way it works is simple. The factor takes your invoice and verifies it. You probably have your clients sign the time cards for the billing process. The factor just checks the credit of your client, and then it checks the time cards.
Once that’s done, you can get up to 80% of the value of the invoice right away instead of waiting 30 or 60 days. The percentage may vary depending on the factor. You can then use that money to cover your payroll and other operational expenses. The factor tracks the invoice and does the collecting. When the client pays in full, you get the 20% back minus the fees charged by the factor.
With this process, you can factor just enough invoices to cover your needs. Your other invoices can be untouched. You can then slowly build your cash flow so that you no longer need the services of the factor.
Long Term Factoring
Some companies, however, prefer to actually do business with factors for the long haul. That’s because factors offer services that prove valuable, especially for staffing companies. For example, the matter of collection is handled by the factor. That means you can just focus your efforts on providing the right manpower that your clients are looking for. You don’t have to bother hiring employees to take care of collections. That even saves you more payroll expenses.
Factors can also track and manage your accounts receivable for you. This means you’re also spared from having to hire and pay a receivables clerk to manage the accounts receivable.
Then there is the matter of credit investigation. Factors check that the credit rating of your clients is good, because they don’t want problems in collecting payments. The factors also make sure that your new clients have a good reputation in paying their invoices on time. With their help, you will know which clients have the habit of paying late or won’t pay at all.
Choosing a Factor
It matters which factor you deal with so that you can maximize the benefits you get. The best ones will offer the highest advances and the lowest fees. They are familiar with the industry and they already know which clients are slow to pay or don’t pay at all. Your factor should also be professional when they collect the payments from your clients.
Choose the right factor, and your cash flow problems will be solved.
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