Cash flow challenges are the bane of businesses large and small. As a staffing agency, most of your money is invested in payroll, so you don’t typically have the option of paying your vendors when you receive payment from clients. To help you even out cash flow headaches, here are some tips.
- Clearly establish and maintain payment terms. The most difficult phone calls people at your agency make are those to your best clients, requesting late payments. It’s a thankless task that can sound desperate, be embarrassing and even be a little nerve-wracking if you’re wondering if your client might find another vendor who’s more understanding. When you establish terms in advance and politely but firmly remind them when they’re late, your best clients will take note and create fewer hassles for your accounting staff.
- Let your bad payers go. Even your best client can be late on occasion, and that is understandable. However, it becomes a problem when late payments are so persistent that they are regularly costing you money and sleepless nights. After all, if you have to regularly access your line of credit to make up for chronic late payers, at some point, that particular client becomes literally not worth the cost. Do you continue to put up with it because your account people are subtly being reminded that there are other agencies out there? Go ahead — let them explore the possibilities. If your tardy clients do come back, get payment upfront, or establish and hold them to tighter terms.
- Establish a bank line of credit. Doing so can be a challenge for smaller companies in a tight lending environment, but it’s always easier to borrow capital when you don’t need it. Establish an emergency-only line of credit when your business is running relatively smoothly.
- Consider payroll funding solutions. You give your clients 30 or 60 days to pay for the employee costs they’ve generated today, but those employees want payment at the end of the week. That’s at the heart of your challenge. With payroll factoring, you can immediately sell your accounts receivable invoices for valuable upfront cash. For example, Tempay advances 90 percent or more of a total invoice, among the highest advance rates in the industry. Also, ask about full-service factoring, which provides the added services of cutting paychecks, printing out invoices, filing payroll taxes and undertaking related tax and payroll duties.
As a full-service payroll funding, invoicing, payroll taxes and credit monitoring resource, TemPay enables staffing agencies to focus on growing their businesses.