Tag Archives: staffing

What is an Accounts Receivable Factoring Company?

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When searching for staffing agency finance, you have probably run across accounts receivable factoring, a type of funding in which you sell your accounts receivable to the factoring company for a cash advance. Your clients then pay the factor directly.

 

Firms of all sizes and in all stages of their life cycle can receive accounts receivable factoring, whether you are just starting a temp agency or established in the field, and whether you have five clients or 50.

 

Funding is available for firms in any staffing industry, whether it is light industrial, administrative, IT, construction, health care, legal or clerical. Many firms also provide factoring to companies outside the staffing industry, as well.

 

Factoring aids your staffing firm by providing quick and easy cash to fund your business in an industry in which companies often suffer from cash flow gaps.

 

There are typically eight easy steps to receive accounts receivable factoring.

  1. Contact your factor’s sales department.
  2. Your sales representative will collect information about your staffing business.
  3. Complete a credit application form and provide client information.
  4. Your factor performs a credit check on you and your business.
  5. Your factor approves your credit.
  6. Your factor meets with you to discuss rates, terms and conditions.
  7. Your factor collects additional information as needed.
  8. Your factor provides you with a draft contract that includes terms, conditions and rates.

 

For information on TemPay and our payroll factoring services, contact www.tempay.com or (866) 683-6729.

TemPay Answers Your Top Client Questions

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At TemPay, we receive questions about our payroll factoring services all the time. Here, we answer your top client questions.

What type of businesses do you factor?

TemPay’s main clientele is temporary staffing firms in any industry, including light industrial, administrative, information technology, construction, health care, legal, clerical and many others.

We also provide factoring services to businesses that regularly invoice creditworthy commercial customers.

We’ve factored companies in the staffing, IT, software, advertising, security services, auto, manufacturing and transportation industries. 

What size clients does TemPay service?

Firms of all sizes and in all stages can receive payroll funding, whether you are just starting a temp agency or established in the field, whether you have five clients or 50.

Are there any restrictions on a client’s location?

No. TemPay serves clients throughout the United States.

Are there restrictions on the location of a client’s customers?

No. Your clients can be anywhere in the United States.

Understanding Recourse and Nonrecourse Factoring Services

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Most staffing agencies choose payroll factoring as their type of staffing agency finance. With factoring, staffing firms sell their accounts receivable invoices for a fee to the factor and gain cash up front to pay their employees and other parties.

There are two different types of factoring.

  • Recourse – With recourse, the staffing firm assumes the risk and losses for unpaid invoices. As a result, the staffing firm must buy back invoices that their customers don’t pay in a fixed amount of time.
  • Nonrecourse – With nonrecourse, the factor assumes the risk of bad debt and is out the money that it is unable to collect. This is safer for the staffing agency but riskier for the factor. This method is often used in 80/20 rule situations, in which 80 percent of your business comes from 20 percent of your clients, and if they failed to pay, your business would suffer greatly.

TemPay provides the former, recourse funding. Most factors provide this type of funding because it carries less risk. If a factor does offer nonrecourse funding, it typically comes with a significant fee.

For information on TemPay and its payroll factoring services, contact www.tempay.com or (866) 683-6729.

How to Grow Your Staffing Agency With Payroll Funding

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Staffing services continue to be in demand because, during an economic recovery, businesses are hesitant to hire full-time employees and instead are seeking a flexible, low-cost alternative.

Staffing Industry Analysts reports staffing revenue in 2013 is expected to hit nearly $135 billion, exceeding prerecession revenue levels.

Whether you’re starting a staffing agency or have been in business for a while, your company has the potential to grow monumentally in the next few years, and factoring — a form of payroll funding in which temp agencies sell their accounts receivables for a fee to obtain cash — can help accelerate that growth.

 

Increased cash flow

When you engage in payroll funding, you don’t have to worry about whether you’ll have the money to fund your payroll each week. That frees up your finances, which you can then invest in growing your business by hiring more employees, expanding your current location or opening a new location.

 

Flexible lending

Payroll factors understand that your temporary employees are often paid weekly, while your clients don’t pay for 30, 45 or even 60 days, creating a payroll funding gap. So if you need additional funding to cover your workers’ compensation costs or office lease payments one month, or a larger-than-usual advance to open a new location, they understand your business and will help you meet your goals.

 

Full service

Full-service payroll funding allows your factor to provide back-office administrative services such as filing payroll taxes, sending invoices and collections. Outsourcing these services frees up time for you to focus on other aspects of your business that will help it grow, such as meeting with clients or interviewing new temporary employees. With less time spent in front of a computer doing mundane tasks and more time spent strategizing and networking, your business will continue to grow and thrive.

 

For information on how TemPay can help your staffing firm grow, contact www.tempay.com or (866) 683-6729.

4 Differences in Today’s Temporary Worker

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Today’s temp workers aren’t your grandparents’ temp workers.

The industry initially took off in the United States post-World War II, employing housewives in part-time clerical positions or to fill in for permanent employees on vacation or sick leave.

However, that is no longer the case. Staffing agencies employ temp workers of all ages, races and sexes in a vast array of industries, with about 13 million people working as temporary or contract employees each year, according to the American Staffing Association.

Here are four ways temporary workers today differ from temporary workers in days past.

 

  1. Temp workers aren’t just laborers or secretaries anymore. There are any number of industries that supply temp workers, including:

 

  • Human resources
  • Customer service
  • Medical
  • Law
  • Engineering
  • Advertising
  • Accounting
  • Manufacturing
  • Information technology
  • Transportation

 

It’s not just bigger companies that are using these workers, either. Smaller companies are also using temp workers for special projects, employee absences or to meet seasonal demands.

 

2. Temp workers are more educated. As the number of industries using temp workers has grown, so has the demand for more educated workers. This reflects the fact that more people are attending college; in 2012, one-third of those ages 25 to 29 reported earning at least a bachelor’s degree, up from one-fifth in the early 1970s, according to the U.S. Census Bureau. Some staffing agencies even specialize in placing C-suite and vice president-level temporary workers.

 

3. Temp workers stay in their positions longer. While temp workers have traditionally been associated with one- or two-week stints, the average temp assignment in 2010 lasted 13.8 weeks, up from 9.6 weeks in 2000. Temp turnover was at a record low of 277 percent in 2010, as opposed to 441 percent in 2000, according to the American Staffing Association. In addition, many companies strike a deal with a staffing service to use an employee on a trial basis, and if that works out, the job can turn into a full-time position. Temp employees are also staying in jobs longer as companies hire them to cover an increased seasonal workload, a stint often lasting months.

 

4. Temp workers enjoy flexibility. Temp workers like the fact that they aren’t tied down to one place day in and day out, and they enjoy working for different companies. This reflects an overall desire by employees for more workplace flexibility. In the mid-1990s, 10 percent of Americans worked from home at least some of the time, while in 2012, that rose to 24 percent, according to the Bureau of Labor Statistics. Temp work can offer those work-from-home opportunities, especially in the customer service and IT industries.

Limitations of Bank Payroll Funding

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When you’re starting a staffing agency, a bank is often the first place that comes to mind when you’re looking for payroll funding. However, just because banks are the traditional means of finance doesn’t mean they are the right option for your business.

There are several downsides to bank payroll funding.

 

  • It takes time. Banks will verify all of your information before issuing any financing. The application process is long, and you’ll need to provide a great deal of information. There are also many prerequisites that businesses need to qualify for a loan, such as a good credit history and proof of a stable income source.

 

  • You risk losing your collateral. Because your commodity is people, you do not have traditional collateral. As a result, to obtain payroll funding from a bank, you’ll need to put up your personal property, such as your home or car title, as collateral. In the event that your business fails and you cannot pay back the loan, you may lose this property to the bank.

 

  • You may not receive the amount requested. Banks may only give you a portion of the money you’ve requested. This means you’ll either need another source for additional funding or you’ll have to decrease your budget. And if you use all of your loan amount or line of credit and need additional funds in a pinch, the bank may not give them to you.

 

  • Interest rates and fees are typically higher. This often slows the growth of your business because not only do you have to pay the amount back, but you also have to pay interest. In addition, if you receive a loan but don’t use all the money, you’re still paying interest on the full amount, and there may be hidden fees attached to the loan.

 

For information on how TemPay can provide payroll funding for staffing companies, contact www.tempay.com or (866) 683-6729.

Choosing a Source For Payroll Funding For Staffing Companies

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Choosing a payroll funding source is much like choosing a pair of shoes: You need to try each one on to determine whether it’s the right fit, because all are not created equal.

So how do you decide which firm is right for you?

 

  • Seek advice from your peers. Ask others in the industry for staffing funding company referrals, and if you have a specific factor in mind, ask if another firm has used it and how the experience was. This allows you to narrow your prospect list and save valuable time.  

 

  • Ask the hard questions. Having stable cash flow is critical for your business, so make sure your potential factor has a stable source of cash. While you won’t be able to delve into the company’s finances, you can ask how you can be assured your company will be able to receive its funds.

 

  • Determine what type of funding you want. Are you looking for a traditional banking solution, such as a loan or line of credit? Or have you considered factoring, in which staffing companies sell their accounts receivable for a fee to a third party to obtain cash? No matter which form of payroll funding for staffing companies you choose, there are pros and cons to each. For example, with traditional financing, you often retain control of your accounts receivable, while with factoring, the factor often gains control.

 

  • Select a firm that specializes in the staffing industry. Factors that specialize in staffing firms will better understand how your business operates and what its unique needs are. This is critical in situations in which temporary employees are often paid weekly but clients don’t pay for 30, 45 or 60 days, creating a cash flow gap.

 

  • Review your options annually. Even if you think you are currently receiving a great deal, it is wise to review your payroll funding for staffing companies options each year. Both banks and factors often offer aggressive rates to gain new business, and if you find a better deal than the one you currently have, you can let your factor know. Most often, it will beat the competing price to keep you as a client.

 

For information on how TemPay can provide payroll funding for staffing companies, contact www.tempay.com or (866) 683-6729.

How to Recruit and Retain Your Staffing Sales Team

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Selling in the staffing industry is different than conventional sales; instead of selling a tangible product, you’re selling a service. As a result, recruiting and retaining members of your temporary staffing sales team is a unique process.

“Staffing sales is more about education rather than just selling,” says C. Adam Forbes, president of BaronHR. “You need someone who can educate your clients on the services you have and how they can help their business, while also educating them on the potential risks and consequences of handling employment on their own.”

 

Evaluate sales skills

There are several skills you should look for in your staffing firm sales staff.

First, look for someone who is self-motivated and who has excellent people skills and strong adaptability, Forbes says.

“One day you’re speaking to a manufacturing plant manager, the next day you’re talking to a CEO looking for administrative help,” he says. “Temporary sales staff needs to be able to talk shop with mechanically minded people but also have the professionalism to speak to upper management. We cater to many different industries, so they also need to have a working knowledge of these industries to present our services in a way that is applicable to our potential clients.”

 

Look for staffing experience

Ideally, hire those with experience in the industry, Forbes says.

“Historically, the percentage of people who are a good fit and successful are those who come with staffing experience,” he says. “There are a lot of moving parts in the staffing industry, and if they don’t have the knowledge, it can be hard to sell.”

If they don’t have experience in staffing sales, experience in some aspect of a staffing firm’s business operations is preferred because they will understand how the industry operates. These could be people who have worked in workers’ compensation, human resources or temp payroll services.

 

Focus on retention

One of the best ways to retain your sales staff is to take care of their clients, which not only builds the reputation of your company but also the reputations of the sales representative, Forbes says.

Another way is to be a good listener and provide support whenever needed.

“Sales staff members need to be able to voice their opinions, and you need to understand their challenges and listen to what they are,” Forbes says. “Everyone wants support and structure to know they are given every possible opportunity to be successful.”

Recognition programs are also excellent retention tools. Consider recognizing your sales staff in company newsletters and at awards dinners, and personally congratulate them on good sales weeks.

A good compensation plan is also key. The best commission structures both incentivize the sales representatives and bring in new business.

“Reward your sales reps for bringing on new clients with a bonus and then with a residual commission based on the profitability of the account,” he says. “This encourages them to bring on profitable and healthy accounts because they benefit them long term. After a year, the commission should drop to encourage them to bring in new business. They can’t have just one big account that they’re living off for the rest of their life.”

5 Ways to Manage Your Temp Agency Payroll

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Managing temp agency payroll is one of the biggest tasks of your staffing firm, and it can be a complex and time-consuming process. Here are five tips to make it easier.

 

1. Evaluate your processes. Talk to employees to determine what works and what doesn’t. Are you diligent about paying taxes but spending a lot of time processing checks every week? Once you know where you stand, you can more effectively identify areas that need assistance.

 

2. Ensure you have enough money to cover temp agency payroll and taxes. This has always been a challenge for staffing firms because you need to pay your employees and vendors weekly but customers often take 30, 45 or even up to 90 days to pay. Whether you use a funding company, a bank or have funding on your own, make sure you are able to meet your cash flow needs.

 

3. Hire effective employees. The staffing industry is all about people, so hiring employees who can understand and execute human resources issues is a must. These are the people who will troubleshoot any issues and make sure the process is running smoothly.

 

4. Consider bringing in a third party. A temp agency payroll funding company can not only provide you with the funds you need to ensure you make payroll each week but can also help with back-office needs such as filing payroll taxes, sending invoices and collections.

 

5. Use all-encompassing software. Find a software solution that is simple, easy-to-use and cost efficient. It should be able to manage both front- and back-office tasks and provide the data your company needs in a single view without lengthy searching. Many temp agency payroll funding companies provide software in conjunction with their services.

How to Start a Staffing Agency

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Starting a staffing agency can be stressful, as there are many pieces and parts with more than some assembly required. Tips on how to start a staffing agency can make the journey easier.

 

  • Create a business plan. This will not only keep you organized but also inform lenders or vendors of your company’s stability and growth potential. The U.S. Small Business Administration has a step-by-step business plan guide to help you create the perfect plan.

 

  • Seek advice. While it is important to have experience in the industry, you can also benefit from the wisdom of your peers. Talk to other owners who have started a firm and ask what they wish they would have known when they were starting a staffing agency. Seek out owners who are not in your niche or geographic area to avoid competition.

 

  • Research governmental requirements. When determining how to start a staffing agency, it is important to evaluate areas such as licensing, taxation and workers’ compensation, as requirements vary by state. Workers’ compensation is typically the second-largest expense for staffing firms, so make sure your coverage counts; ensure that your coverage protects not only your business but your employees, as well.

 

  • Evaluate your cash flow needs. The staffing industry is unique in that temporary employees are often paid weekly, while the firm’s clients don’t pay for 30, 45 or 60 days, creating a cash flow gap. In the first year, especially, staffing firms should keep close track of their cash flow needs and determine whether a factor can alleviate those needs. Don’t forget to include not only your income and expenses but also how much cash you’ll need to operate on a day-to-day basis.

 

  • Gather clients. Ask for referrals from people you know in the industry and let your existing contacts know you’re open for business. However, be sure to follow the rules of your noncompete agreement if you’ve previously worked for a staffing agency. Also consider cold calling potential clients or purchasing mailing lists or trade association directories.

 

  • Hire employees. Recruit through resources including advertisements in trade media, newspapers and online job sites. Don’t forget your contacts, such as clients and former employees. Do a simple online background check on potential employees to start but also consider a professional background check, which will provide more detailed information. And don’t forget, when starting a staffing agency, you’ll need internal staff, as well.

 

For information on TemPay and how to start a staffing agency, contact www.tempay.com or (866) 683-6729.