If you want to expand your recruitment offerings and process to boost your profits by improving your ability to market your business then contract staffing can be a great option for you. But to organize payroll for your contracted staff you will need funds unless you get paid by your clients because payroll funding for staffing agencies is the responsibility of their owners.
It can be more difficult to manage the funds for payroll for staffing agencies if the flow of cash is not favorable. Your client may pay you after 30-0 days but you may have to pay your contractors on a weekly or biweekly basis. Even if you have only one contractor, you may need thousands of dollars for his payroll before you expect payment from your customer. The funding of payroll can increase quickly if you have several contractors for your staffing agency.
In order to maintain the profitability of your business, you should not allow the cost of payroll funding increase. As far as payroll funding for staffing agencies is concerned you can use a few options discussed in this write-up.
Options for funding payroll for your staffing agency
The meaning of funding the payroll of contract staff is not confined to their wages or salaries but you should also have funds to pay for several other things like unemployment taxes, liabilities of employer tax and compensation insurance of the workers, etc. Initially, it may look stressful to fund the payroll but you can arrange the things until you are paid by your clients without much effort by following the tips discussed here under.
Line of credit: You can ask your bank for a line of credit for funding payroll for your staffing agency. It is a revolving account that allows you to use it for funding your payroll, unlike a loan. Though it allows you to use funds against some fees but you control its cost by paying off the cash withdrawn from this account with the payments received from your clients.
It is one of the best options for funding payroll for large staffing agencies and companies but you cannot open a line of credit with a bank if the size of your staffing agency is small. Moreover, you will have to pay fees uselessly if you apply for a too small or too large line of credit. Furthermore, it can increase the risk of forfeiture of your assets used as collateral while getting a line of credit from a bank.
Self-funding: For funding the payroll of your staffing agency you can also use your money. You need not pay any kind of fees or take a loan for this purpose if you use your own funds.
You will have to plan your budget to organize payroll for your staff from your own funds. From the profits of your placement or staff recruitment business, you will have to put some funds aside. But it can be a bit difficult for you to fund the payroll for your staffing agency if you have just started it.
You may not be able to run your business of contract staffing unless it becomes profitable, you have large savings in your account, you already have a successful business of direct hiring staff or you have some other income source.
Outsource contract staffing back-office: The provider of back-office contract staffing will not only take care of funding your payrolls but also control the task of processing payrolls. In this way, your contractors will legally become the employees of the provider of Back Office Staffing Solutions The back-office provider will handle all the responsibilities of the contractors including negotiating the contracts, unemployment insurance, worker’s compensations, background checks, administration of benefits, as well as making invoices and collection of payments, etc.
When you use the option of contract staffing back-office then you can get more the just funding payroll for staffing agencies as it will also allow you to earn a considerable amount of profits per hour on your works of your contractors.
Moreover, you will not only get rid of the problem of funding payroll but also save a lot of time to do some more fruitful tasks by outsourcing your payroll to the provider of contract staffing back office.
Payroll factoring companies: Another option for funding payroll for staffing agencies is to use factoring of invoices. Asset financing services are offered by the companies dealing in payroll factoring or funding. The invoices of the client due to be paid within 90 days are purchased by the factoring companies and give you cash immediately.
The amount of invoice will be paid by the funding company in two installments. One installment will be paid in advance and a percentage of it will be held by the company as security until the invoice is paid by the client. And you will have to pay a percentage of the invoice as fees for factoring invoices.
The process of approval for factoring invoice moves faster than funding by banks but you should keep in mind that the credit of your client will be considered by the company factoring invoice. An agreement is signed between you and the factoring company if your invoice is approved by them. You will be paid advance money as soon as you sign this agreement. This advance money can be 80% of the amount of the invoice or can vary depending upon the factoring company.
It is up to you to inform your clients about the factoring of their invoices so that they can directly pay the invoice to the factoring company. You will receive the amount withheld by the factoring company when the invoice will be completely paid by your clients to them.
The fees of factoring invoice will a percentage of the total amount of the invoice which can be influenced by the time taken in making the payment as well as the soundness of the client. Some of the factoring companies may charge some extra fees like fees to check credit, transaction, or for opening an account, etc. from you.
Thus, you can organize payroll funding for staffing agencies by using any of the options discussed in this write-up.