Invoice factoring for nurse staffing has been known as a great way to help nurse staffing agencies grow by receiving a steady cash flow. Many nurse staffing agencies struggle with clients who take a month or two to pay their invoice, and that can really damage the business.
Invoice factoring is a great option for nurse staffing companies to remain in business, due to receiving cash immediately and not having to wait a long time to get paid, which could lead to drowning in debt.
Nurse staffing companies are an important business, as they provide medical companies with experienced nurses when they are understaffed or have an emergency. Factoring companies understand that nurse staffing agencies want to provide their clients with the service they promised to them, and some clinics and hospitals can have a difficult time paying the agency the money they owe them the next day.
Factoring your nurse staffing invoices will help you keep your business growing and hire more experienced nurses to serve the medical industry when needed, as well as pleasing your clients who trust you to provide that service.
How does nurse staffing invoice factoring work?
Invoice factoring means selling your unpaid invoices at a discounted rate to factoring companies of your choice. Once you sell your unpaid invoice, the factoring company will give you cash within 24 hours and bill the customer who is responsible for the unpaid invoice based on the terms that everyone agreed on.
Benefits of invoice factoring
Invoice factoring has a lot of benefits for every business involved. It allows you to serve your clients without suffering if they take a long time to pay, and it gives the client time to pay the invoice.
Here are the many benefits of invoice factoring:
Offers variety
Whether you are a company that specializes in registered nurses staffing, clinical nursing, licensed practical nurses, pediatric nursing, or travel nursing, a factoring company such as prnfunding.com will accept your unpaid invoices and give you the best deal.
Easy to approve
Invoice factoring companies are different from banks. They will not focus on approving the invoice based on your credit but the decision will be made based on your customer’s credit. It will also not impact your credit score if you choose to factor unpaid invoices.
Get money instantly
Factoring companies will pay you a discounted rate of the invoice within 24 hours or less. You will have money in your bank account at all times.
Avoid additional debt
When you work with a factoring company to handle unpaid invoices you will save yourself and your business from asking the bank for another loan that will build more debt. Invoice factoring has the benefit of avoiding falling into more debt.
Financial security
Having quick access to earn money with factoring companies will make your employees happy, as you will be able to do payroll on time and pay them without any delays. You will also pay all of your bills and other financial responsibilities such as rent and utilities, malpractice insurance, office space, marketing investments, lawyers, supplies, and medical equipment when it is due.
Provides business growths
The medical industry is constantly in demand for emergency nurses. Having a steady flow of cash from invoice factoring will give you the freedom to recruit more nurses and generate more clients.
Get approved quickly
Factoring companies take 3-5 business days to approve your unpaid invoices once all of the documents have been submitted. In short, you will have money in your hand within a week or less.
Less stress
You will no longer deal with the financial stress when your customers take months to pay for the invoice and the services you provided.
Flexibility
Most factoring companies will give you the freedom to choose which unpaid invoices you want to factor. You won’t be pressured to factor every client’s invoice and the terms of your contract are more flexible.
How much does it cost to factor invoices?
Factoring companies offer a discounted rate for their clients. The discounted rate is based on a number of factors such as the number of invoices, the dollar amount, and the credit score of the responsible client. Some factoring companies will also charge a small factoring fee, monthly minimums, and contract termination.
In the end, the amount of money you will receive from factoring invoices will be between 70% to 96% of the total invoice. Some companies will also charge a reserve fee that will be returned back to you once your customer pays for his invoice, while some may charge a reserve fee only or other additional fees with it.
What is the difference between recourse and non-recourse factoring?
When choosing a factoring company, you may notice an option between recourse and non-recourse. It’s important to learn the difference between the two options and make a decision that will be best for your business and the staff.
Recourse factoring
Recourse factoring is the most common option, as it is the most affordable for nurse staffing agencies. Recourse factoring means that when you factor an invoice and your customer does not pay them within a specific amount of time, you will be required to pay the factoring company back.
A lot of nurse staffing agency owners choose this option, as it costs less than the non-recourse factoring. Accepting full responsibility for your own clients and taking the risk can save you more money.
Non-recourse factoring
Non-recourse option means that if the factoring company decides to approve it, they will take on full financial responsibility for clients who are not able to pay for the invoice. Although this seems like the least risky option, it comes with very strict terms.
These terms for non-recourse factoring are:
- If the client’s hospital or clinic has filed for bankruptcy when the invoice was factored.
- If the client’s hospital or clinic has gone out of business when the invoice was factored.
Non-recourse factoring will not cover any invoices that are unpaid due to late payments, dispute between the nurse staffing agency and the company who hired them, or have difficulties collecting the money from the client.
Which option is better?
Recourse and non-recourse both have their own pros and cons. In the end, you have to consider all of your options and speak to the factoring company to come up with a decision that is best for your business.
Recourse factoring has the benefit of lower factoring fees and high advance rates, but it comes with the risk that your client may be unable to pay for the invoice and you will have to pay the money back.
On the other hand, non-recourse factoring will protect you, your business, and your staff from losing money if the client is unable to pay the factoring company. The con of non-recourse factoring is that it will cost you more money and not all of the invoices will be approved.
Spot factoring vs. High Volume Factoring
There are two forms of factoring, spot factoring and high volume factoring. Both options will also depend on your needs and what will help your business more.
Spot factoring: This option gives you the absolute control to sell all of the invoices or some of them. Spot factoring is a great choice, as you won’t have to pay extra fees for that service. The only problem with this choice is that your discount rate will be higher than what the factoring company usually offers.
High volume factoring: This choice is a traditional option when it comes to factoring. In order to do high volume invoice factoring, you are required to sign a contract with the company that indicates that you are in agreement to sell all or most of your invoices.
While spot factoring gives you flexibility and freedom, it is more risky than high volume factoring. High volume factoring is also better to make more money, as the amount you will get is larger than spot factoring.
What are the common fees?
Every factoring company will offer you a discounted rate that is 70% to 96% of the invoice, but there are other additional fees involved as well that are used for application, service, maintenance, and more.
Here are the most common fees:
Diligence fee: This fee is also called setup fee, which is an upfront fee before the company processes the invoice. It is used on credit checks of the client and the cost of opening an account with them.
Application fee: A set up fee to evaluate the application and the arrangement between both parties.
Maintenance fee: A fee used to ensure that your account is active and continues to be administered.
Termination fee: Depending on the factoring company, your contract with them could be 6 months long to a year. If you happen to terminate the contract early, you will be charged a cancellation fee.
Wire fee: If you choose a wire transfer instead of the automated clearing house option a fee will be charged.
