Are you passing up Staffing business?

It’s no secret - the economy is currently in the tank. Businesses are laying off workers, bankruptcy is at an all-time high, the housing market is terrible, and companies are cutting expenses to survive. To say the least, the forecast for success, for the most part, is bleak for the foreseeable future. However, there are some areas that are seeing some slight growth, or growth potential, to include the healthcare and information technology staffing sectors. My question is, if you are staffing/recruiting in those areas, especially on a contract basis, are you turning down business because of lack of funding to support that business?

There may be a few reasons a staffing company may turn down business. One may be a lack of manpower to recruit employees for client openings. With many staffing companies trimming expenses, there may have been a need to lay off recruiters, which hinders the ability of the company to recruit as many employees to work on assignment. The second reason is that clients of staffing firms are taking longer to pay their vendor invoices. Companies are trying to hold on to cash reserves for as long as possible, and their vendors are starting to see extended payment terms for their services. A third reason may be that the creditworthiness of a potential client (i.e. the client’s ability to pay for services) may have diminished with the weakened economy.

With all of these variables in place, staffing companies may be taking a wait and see approach before expanding their business. Again, my question is, why wait to expand your business? Staffing companies should be taking advantage of every opportunity to grow the revenues of the company. If the ability to fund the business and process the payroll and payroll taxes were taken out of the equation, wouldn’t you seek to grow your business? There is a simple solution to taking on the new business, and it involves partnering with a funding source that understands your business.

Staffing owners are in the ultimate Catch-22 business - the more contract placements you make, the greater the need for sufficient working capital funding to carry payroll and other costs of doing business. Your employees expect to be paid weekly, or at least bi-weekly, yet it takes from 30 - 60+ days for your clients to pay for your services. Without proper funding to cover those costs, it can be difficult to grow your business. Also, you must have resources available to process the payroll, file and pay 941 payroll taxes, pay your employee, create and send out invoices, and send out year-end W2s and/or 1099s. Partnering with a funding source that can not only cover working captial costs, fund weekly profits, process payroll, payroll taxes, pay employees, file 941s, and send out W2s can be a life saver for staffing companies.

So what’s it going to cost? Most funding companies charge anywhere from 2% - 5%, depending on the services they are providing. The real question should be, what’s the opportunity cost of passing up additional business? Patnering with a funding company will allow you to cover the costs of doing business, assist in credit profiling of your potential clients, monitor your outstanding receivables, assist with collection efforts, and taking some of the administrative load off your plate will be your best option for growth.

If you would like to discuss your situation, you may email Dale Busbee, VP of Business Development at Prosperity Funding, at or call (985) 641-8817.

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