There’s no denying the fact that when a company of any size begins to stagnate, it becomes monumentally difficult for it to start the process of growing and evolving with the times. There can be a different number of reasons why stagnation happens in the first place – though the biggest culprit is normally a slow cash flow. When the money is coming in at regular intervals but isn’t arriving fast enough because of invoices being paid right before the deadline, it can leave a company with very little to work with. The only thing it can do is barely keep itself afloat.
The worst part of it is after an extended period of stagnation, things slowly go from bad to worse. If you have companies unable to move forward in an industry where evolving with the times is necessary for survival, then you can see just how disastrous the ramifications of this can be. Fortunately there are some clever solutions available such as payroll factoring as well as funding. Before you can truly take advantage however, it’s important to know the ins and outs of how exactly these two processes work.
When does payroll factoring and funding become necessary?
This is certainly an important question, but the key word here is most definitely ‘payroll’. Some companies stagnate so much that they’re simply unable to keep themselves going with the cash flow they have. This means that the employees will begin to suffer, because even the payroll gets affected as they won’t be able to be paid on time. While this is certainly a desperate time for just about any company, it certainly isn’t the end of the line. This is exactly the time when payroll factoring and funding become completely viable.
Whether factoring or funding, it helps take care of the payroll
While there are certainly background and credit checks involved before an agency agrees to help you with either factoring or payroll funding, the main similarity between the two is how they both help alleviate the responsibility of payroll. Both these solutions are meant to help a company speed up their cash flow, which then allows them not only to pay their employees on time, but also to use it in ways that help the company move forward and make progress. You’ll be surprised just how many businesses out there suffering stagnation could turn the tables around if they just had a bit more funding, which is exactly what these two solutions provide.
What are the differences between payroll factoring and funding?
The main difference lies in how much help you receive. When it comes to factoring, you basically sell your unpaid invoices to an agency, which then takes care of payment collection. Basically, they help free up the responsibility of having to collect it from your customers while at the same time speeding up the process tremendously. In return, they take a small cut from the invoice payment you would normally receive from those customers.
Payroll funding on the other hand has more going on. The agency will be assuming many of the responsibilities that have to do with working on the payroll, all the while keeping you updated on everything that’s going on. This normally starts with the company sending out a fixed timesheet to the agency so that they can start conducting back-end services such as sending out a weekly payroll to your company’s employees. This also includes the filing of payroll taxes, which means funding is quite a bit more extensive than factoring – whereas factoring provides your company with a great deal more freedom and less risk in general.
Both choices are incredibly viable
No matter which solution you decide to go for in the end, the results will certainly speak for themselves. When a company becomes stuck in a routine and is unable to make a dramatic move forward because of stagnation, it can be an incredibly stressful time for everyone involved. Both of these choices provide the solution of giving a company some much needed money at just the right time. The possibilities of what exactly your business will do with this improved cash flow is up to you – but either way you are presented with an opportunity to break out of the cage that your business has found itself in.
A good example would be a marketing campaign that your business just couldn’t conduct because of a lack of funds. Sometimes you have to spend money to make money, but the amount of money you can spend is limited. Through the use of either solution, your company is injected with the money it needs to finally get the campaign started. You can finally get that popularity boost that your company needs, and the influx of new customers will make it so that you won’t even need either factoring or funding in the near future.
Are there risks involved?
No matter what we do, in the world of business there will always be even just a little bit of risk involved. However, the pros that these solutions provide far outweigh the cons – especially when it comes to factoring. After all, with invoice factoring all you have to do is sell your unpaid invoices. Because the agency bought these invoices for a percentage commission, that’s the limit of the amount of risk involved. Since you sold what’s already yours to begin with, you didn’t put your company at risk.
This is especially apparent if the customer refuses to pay and you have recourse with the agency. This means that they shoulder the possible risk of the customer not paying. As a matter of fact, even if you have to shoulder the consequences, you already received money for the invoice which makes things easier. To conclude, compared to taking out a loan, there’s a lot to gain by going for payroll factoring and payroll funding. With a completely legitimate business that’s suffering from slow cash flow, there’s very little to lose and everything to gain by giving these solutions a try.