In 2018, the longest government shutdown in history started because of a funding disagreement over the US-Mexico border wall. It left more than 400,000 government workers on unpaid leave, and an additional 400,000 federal employees working without pay across dozens of federal agencies.
With a continually divided US government, it seems likely that a government shutdown will happen again. And when it does, the 4 million contractors who work for the government are particularly vulnerable. While some government workers receive retroactive pay after a partial shutdown ends, those whose pay comes from federal contracts have little hope of recouping the losses. And the staffing agencies who supply some of them are in a bind.
In this blog we are looking at the impact of a government shutdown on staffing agencies who supply workers for government contracts. Here are a few ways a shutdown could affect your firm:
LESS BUSINESS – FROM THE GOVERNMENT
It probably goes without saying that you will not be getting any new government contracts during a shutdown. No new contracts or modifications will be issued, and there will be delays in the acquisition process for procurements. Additionally, invoices for business you have already completed will not be paid during the shutdown and may be delayed after the shutdown is over.
Not good news for staffing firms – especially those required to still provide workers.
NO PAY – BUT WORK ANYWAY
Some contractors are in the tricky position of having to provide (and pay!) workers during the shutdown while not receiving pay from the federal government. This is because some project deadlines must be met regardless of whether a shutdown occurs, so their employees will keep working even if the government closes.
This causes cash-flow difficulties that are made even worse if you don’t receive back pay after the shutdown is over.
POTENTIAL BUSINESS – FROM FURLOUGHED WORKERS
Many Federal employees furloughed turn to staffing firms in order to pay the bills. Staffing firms all across the country can expect a slight influx of government workers just trying to keep afloat financially with temporary work. Staffing firms are in a unique position to help.
TIME TO CHECK YOUR PRIORITIES
If nothing else, one positive thing that can come from a government shutdown for staffing firms is a reality check. Does your firm rely on government contracts too much? If so, it might be time to focus your efforts on diversifying your business. If one large contract is all it takes break your business, that’s not a sustainable way to do business and you might want to rethink your strategy.
These are just a few ways that a government shutdown could affect your staffing business. If the shutdown is negatively affecting your cash flow, contact us today about accounts receivable financing by filling out a request a consultation form.
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