Factoring companies provide payroll funding services, also called payroll factoring, to staffing agencies so they can bridge the pay gap caused by employee payroll and customer invoicing. Staffing agencies have inherent cash flow issues because customer invoices don’t get collected until 15, 30 or 45+ days, yet they have to pay their employees on a weekly or bi-weekly basis. Payroll funding pays you up-front for your invoices, so you don’t have to wait for invoice payments.
How payroll funding works
Payroll funding is the regular process or cycle of billing your customers, paying your employees and getting funded by your factoring company. Once your staffing employees complete their time sheets and they are approved by your client, you generate the invoices from the time sheet. You send the actual invoice or a copy of the invoice to your factoring company, depending on your billing arrangement with your customer and factoring company.
Your factoring company verifies the invoices and sends you a cash advance for 80 to 95% (advance rate) of the invoice amount. Factoring companies usually provide same-day funding or payment within 24 to 48 hours of receiving and verifying your invoices. Once the invoice becomes due, your customer pays the factoring company directly (based on notification) . The factoring company remits the final reserve to you of 5 to 20% (less factoring fees) depending on the advance rate.
Temporary staffing
Temporary staffing agencies hire their own employees and assign them to their clients to fill vacancies or shortages due to maternity leave, worker shortages, seasonal spikes, or special projects. Staffing agencies usually specialize in certain industries such as administrative office work, warehouse and factory jobs, housekeeping personnel or catering services.
Contract staffing is a type of temporary staffing that is done on an individual basis, according to contractual requirements between the staffing firm and the client. Contract staffing employees are typically highly skilled and professional. Common contract staffing positions are in the areas of accounting and finance, information technology, telecommunications or engineering.
