One of the most difficult and time-consuming aspects of operating a staffing agency is maintaining payroll, tax and invoice services. Staffing firms have a multitude of options to consider when identifying the best path to manage that financial side of the business—outsourcing it completely, handling it all internally or picking a combination of the two.
“It is all about maintaining strong client relations,” explains Brian Keuper, TemPay’s client relations manager. “Some staffing firms prefer to take advantage of all the services that TemPay can provide. Others want to perform some of those services themselves. Some want TemPay to be virtually invisible, while others want us to handle calls on delinquent accounts. We work with the client to find the best option for them.”
For agencies opting for a full-service option, TemPay provides invoice factoring to fund the agency then processes paychecks, prints and collects invoices, and files the agency’s payroll taxes. Payroll options include paycards (similar to debit cards), direct deposit or live checks—though fewer people prefer checks today.
Full service also relieves the staffing agency of handling all the finance-related mail, including postage and overnight delivery charges. In addition, TemPay performs credit monitoring, handles collections, prepares IRS Form 941 and mails W-2s and tax returns, Keuper says.
Daniel Jarrod*, a staffing firm owner in Ohio, uses the full-service option. “It has enabled me to run very skeletally because I don’t need to have a big staff,” he says. “At the end of the day, I’m a sales guy, not a back-end-of-the-office guy. Having TemPay handle everything allows me to focus on what I’m best at in the first place, which is growing the business and making it a success.”
Another funding option used by staffing agencies is money only. The firm generates and sends its own invoices, but also sends copies to TemPay, which advances a percentage of the money the agency expects to collect from the invoice. The company then processes its own paychecks, and pays and files its own taxes. This gives a staffing agency immediate access to working capital that otherwise would be unavailable, Keuper says. It can be essential because agencies must pay their employees before their clients pay them.
“A staffing company’s raw material is its people,” says Bruce Friedman, director of assurance services at SS&G Financial Services, whose clients include the staffing industry. “You provide the people today, and you have to pay today because it’s payroll. But after you pay your employees, you might bill your client next week. And after you bill the client, it might take 45 days before you receive payment. So it starts to become very difficult to have working capital, especially to meet payroll.”
One other popular option for staffing agencies is factoring services in which the staffing agency sells its invoices to TemPay for a cash advance. TemPay then forwards the invoices to the agency’s clients who pay TemPay rather than the contracting agency.
In most cases, these contracts are with recourse, TemPay typically charges back an agency on an invoice that remains outstanding for more than 90 days. In this case, the staffing agency assumes most of the risk, but benefits from lower fees. In a non-recourse contract, a factoring provider would assume 100 percent of the risk of non-payment.
Although not full service, factoring still takes away much of the back-office work, reducing the agency’s overhead, Keuper says.
Joseph Otto*, a staffing agency owner in Florida, has used TemPay’s factoring and invoice generation services for about three years. “I like this option because I can concentrate on serving my clients. I handle my own payroll because I think it’s just easier to do it myself, but TemPay’s services save me a great deal of time.”
Want to learn more about the best financing option for your agency, contact TemPay’s Brian Keuper at (800) 470-4670 or firstname.lastname@example.org.