Staffing factoring checklist

Use this checklist before signing a staffing factoring agreement. It covers timecard eligibility, payroll tax compliance, client credit limits, and contract exit terms. Educational only—not legal advice.

Timecard and invoice eligibility

Item	What to check	Note
Timecard approval requirement	Confirm whether signed client timecards are required for every invoice or only for disputed amounts.	Unsigned or disputed timecards can make an invoice ineligible until the dispute is resolved.
Adjustment and dilution policy	Identify how hour adjustments, credits, and revisions to submitted timecards are handled after funding.	High dilution rates can result in increased reserve requirements or eligibility restrictions.
Billing cycle alignment	Confirm that the factoring submission cycle aligns with your timecard close and invoice issuance schedule.	A mismatch between timecard close and submission deadlines can delay funding by a full week.
Minimum invoice amount	Ask whether there is a minimum invoice amount per submission or per client.	Small invoices from part-time placements may not meet minimums in all programs.

Payroll tax compliance

Item	What to check	Note
Current payroll tax status	Confirm whether the factor requires evidence of current 941 payroll tax filings.	IRS tax liens can take priority over a UCC-1 security interest, affecting factor eligibility decisions.
Payment plan disclosure	Determine whether an active IRS payment plan must be disclosed and how the factor handles it.	Failure to disclose a tax payment plan can be treated as a representation issue under the factoring agreement.
Ongoing monitoring	Ask whether the factor will monitor payroll tax compliance during the life of the program.	Some programs require periodic payroll tax certifications throughout the contract term.

Client credit and concentration

Item	What to check	Note
Credit limits per client	Ask about the credit limit for each of your active clients and the process for increasing limits as placements grow.	A binding credit limit on a large client can cap funding before your invoice volume does.
Concentration limits	Identify the maximum percentage of the funded pool that a single client can represent.	Staffing programs typically cap concentration at 20 to 25 percent; some make exceptions for large enterprise clients.
Client credit review process	Ask how long client credit approval takes for a new client relationship.	A new client cannot be funded until credit review is complete—plan for this when starting new contracts.
Disputed clients	Ask whether any of your current clients have been declined or restricted in past programs.	Some factors maintain internal lists of clients with poor payment history or compliance issues.

NOA and payment setup

Item	What to check	Note
Notice of assignment process	Confirm when and how your clients are notified to redirect payment to the factor.	Client NOA setups can take several days through procurement or AP portals at large enterprises.
Client AP system requirements	Identify whether any clients require specific vendor payment setup forms or portal registrations.	Large enterprise accounts may require formal vendor onboarding before the NOA update is processed.
NOA impact on client relationship	Prepare a simple explanation of factoring to share with clients who ask questions about the arrangement.	Factoring is routine in staffing—a clear, matter-of-fact explanation avoids unnecessary concern.

Contract terms

Item	What to check	Note
Minimum monthly volume	Identify the monthly invoice minimum and the shortfall fee structure.	Minimum fees apply during slow periods, between contracts, and when a major client pauses placements.
Contract length and auto-renewal	Find the contract term and renewal clause; calendar the notice deadline for non-renewal.	Missing the renewal notice window can extend the contract by a full additional term.
Termination fee formula	Identify how the early termination fee is calculated—flat amount, remaining term, or multiple of minimum fees.	The actual exit cost may be significantly higher than the quoted flat fee if calculated on a remaining-term basis.
Bundled payroll option	If the factor offers payroll processing with factoring, compare total bundled cost to your current payroll arrangement.	Bundled programs have different cost structures that require separate evaluation before comparison.

Questions to ask before signing

What timecard documentation is required for each invoice, and how are disputed hours handled after funding?
How does the program handle payroll tax compliance monitoring during the contract term?
What are the credit limits for my current clients, and how quickly can limits be increased?
How long does client NOA setup take for new enterprise accounts?
What is the exact termination fee if I exit after six months versus after twelve months?

Sources

International Factoring Association - International Factoring Association. Accessed 2026-05-19. Industry association source for factoring terminology and industry context.
Secured Finance Network - Secured Finance Network. Accessed 2026-05-19. Industry education source for secured finance and asset-based lending context.
Uniform Commercial Code Article 9 - Uniform Law Commission. Accessed 2026-05-19. Reference for secured transactions concepts including receivables and filings.

Last updated 2026-05-19

Financial disclaimer. This page is educational only and is not financial, legal, tax, accounting, or credit advice. Factoring terms vary by provider and contract. Read the full disclaimer.