Staffing agencies have a wide range of financial obligations, from workers’ compensation insurance to marketing to office equipment. Yet one of the biggest financial challenges is funding payroll.
Many staffing agencies choose to finance their payroll invoices through a factoring company such as TemPay LLC. But what is payroll factoring? How is it different from bank financing or another funding source? And is it right for your agency?
Payroll factoring 101
The benefits of partnering with a payroll factoring company include greater flexibility for growth, reliable cash flow and the ability to pay temporary employees on time.
Payroll factoring essentially allows your staffing agency to “sell” its accounts receivable invoices to the factoring company for a fee, in return for upfront cash to pay your employees and other related parties. TemPay advances 90 percent or more of a total invoice, among the highest advance rates in the industry.
Types of payroll factoring
Depending on what type of funding your business needs, you can apply for full-service factoring, which includes assistance with payroll administration, or money-only factoring, which is funding only.
- What is money-only payroll factoring? With money-only factoring, TemPay will wire money into your company’s account for eligible accounts receivable to cover expenses. Your agency then processes its own paychecks, prints invoices, and pays and files payroll taxes.
- What is full-service payroll factoring? With full-service factoring, TemPay not only provides funding but cuts your paychecks, prints your invoices, pays and files your payroll taxes, prepares and provides W-2s to your employees, and prepares and files your quarterly and annual payroll tax returns.