So I want to talk to you about a cash flow solution that is tailor-made for businesses like temporary staffing companies. It’s called invoice factoring or accounts receivable factoring. Let me explain how it can work for you. Let’s say this week you pay your contractors $10,000 and that you have a 50% mark up. You are invoicing your clients for $15,000, but you may not get paid for at least 30 days. In the meantime, you will spend $30,000 more in weekly payroll before you receive payment of the initial $15,000 billed. This can create stress if you don’t have ample cash reserves.
Here’s how you can solve this problem with factoring. Factor the $15,000 in invoices, you can receive 90% of the face value of your invoices upfront. So let’s say you get 90% immediately and the remaining 10% less the factoring fee when the invoices are collected. That means in about 24 to 48 hours after you set up a factoring arrangement you are paid $13,500 to cover your weekly outlays. Eventually you’ll end up receiving about 97% to 99% of the $15,000 billed.
You can keep factoring your invoices weekly until you build your reserves. Or you can do so indefinitely, as many of our clients do, once you experience firsthand the benefits of factoring. I can’t speak for every factoring company, but I can tell you we charge 1% to 3% of the invoiced amount for our services. Plus, Meritus takes on the responsibility of collecting payment on the invoices so you can free up your staff to work on higher payoff activities for your company.
Other Advantages of Invoice Factoring It’s important to note that invoice factoring is not a loan. You don’t pay high interest rates or a monthly payment. And your credit is not a consideration. What Meritus, or any factoring company, will examine is the creditworthiness of your customers who are paying the invoices.
To summarize, factoring benefits your staffing company as it provides you cash flow to meet weekly payroll and operating costs, charges you a minimal fee for services and eliminates your need for accounts receivable personnel. Plus, it does not require high interest costs, monthly payments or credit approval. All you need is reliable clients and outstanding invoices.
If you’re interested in learning more about factoring, have specific questions, or are ready to get started contact us at 877-648-3709 or apply now!