Entering the contract staffing industry can be a lucrative venture, so long as you have the infrastructure to sustain your business. With an ever-increasing number of Canadian professionals looking to achieve more flexible work in the gig economy, a competitive firm has its pick of a high volume of skilled contractors to offer. Yet, with a high volume of contractors comes a greater demand for biweekly and sometimes even weekly payroll.
You’re probably already well aware that clients’ pay schedules won’t always line up with yours perfectly. In fact, in most instances, your clients will have pay schedules that run from 45 to 90 days. While you could wait to pay your contractors until you receive payments from your clients, such a practice will prevent you from landing and retaining the best contractors.
So, how important is payroll financing in the contract staffing industry? The answer is that it’s imperative. Read on if you want to know exactly why you should secure financing that can handle the rigours of Canadian contracting.
Traditional Solutions Are Inflexible
While you might think you have the options of opening a line of credit with your local bank or engaging a factoring firm, these solutions are costly. These solutions actually put your staffing firm at more risk because neither of them can account for the fast-paced growth of the contract staffing industry.
Lines of credit, for instance, can solve the problem of steady cash flow initially. But the amount you’re cleared for by the bank is limited and won’t be easy to negotiate if your firm sees sudden growth. Lines of credit also don’t afford you much room to work with if your firm experiences a slow productivity season. Although interest rate might be lower than your standard credit card, the costs of a line of credit will compound over time.
Factoring firms, which can advance most of your invoice amounts and focus on your clients’ creditworthiness instead of your business’, only sound like a more stable option than lines of credit. In truth, factoring firms often charge anywhere as high as 6 percent of your invoice amounts and require you to share in your receivables risk. These service fees, coupled with no insurance should your clients prove untrustworthy, don’t meet the needs of your contract staffing agency.
Payroll Financing Means Stable Pay Scheduling
When you have access to payroll financing that’s designed for a staffing firm, you have the means to pay your contractors on a consistent schedule. Back office service providers like The Staffing Edge have years of experience in financing solutions for the Canadian contracting industry.
You’ll receive payroll insurance that’s flexible to your firm’s needs and the ability to customize your pay schedule. You’ll always have the money you need to pay your contractors, with low interest fees. This offers greater stability.
Credit Checks Prevent Untrustworthy Partnerships
Lastly, payroll financing is able to account for potential untrustworthy clients who might default or pay late often. Providers can also offer pre-emptive credit checks on prospective clients. Whether it’s due to fluctuations in the market, productivity slowdowns, or just plain bad luck, there are going to be times where clients might be worse off than they project to your firm. You need an option like credit checks to give you vital insights into their credit history.
With financing obstacles out of the way, your firm can unlock a lucrative revenue stream with contract staffing. That’s why securing your payroll financing is of paramount importance.