Employees expect to be paid on time, no matter what cash flow hardships their company may be facing. Each employee has his or her own financial obligations, and waiting patiently while you figure out where the money is coming from may well be the catalyst for disgruntled employees to either not be motivated to complete tasks, or to search for a new position elsewhere.
Inability to make payroll may not necessarily indicate that your business is in financial crisis; it may also be due to a large amount of overdue invoices, an unexpected inventory purchase, or possibly a seasonal decline in sales. Without cash flow reserves, the ability to cover payroll may sometimes be compromised. You most certainly do not want to experience any legal ramifications that could also go hand in hand with not making payroll on time. Paying employees is among the top legal obligations for your business.
Once you are in the compromised position of struggling to make payroll, it is necessary to look for a quick answer. If time is on your side, you do have the option of trying faster collection from those accounts that have been extended lengthy payment options, but you may not want to create an uncomfortable position for yourself with those accounts. If customers feel pushed to pay invoices before their perceived due date, they may start questioning your business practices. Invoice Factoring helps businesses receive cash today for outstanding accounts receivable due to be paid at a later date. Cash now, for invoices due in the future means your company can use the cash to cover expenses such as payroll.
Some factoring companies offer specific payroll funding for staffing companies. This is a great option for staffing companies who must meet payroll at least 30 days prior to receiving payment on invoices. Additional funding services may be offered that allow even earlier access to your cash for payroll each week. The Payroll Advance Program from Bay View Funding allows staffing companies to have access to funds on Monday for payroll due on Friday.
Your employees are the driving force of your business. Any time you experience the sort of cash flow crunch that forces you to consider delaying payroll, it is time to look carefully at your business plan, revisit your credit policy and make provisions for the future. Using Invoice Factoring for a period may allow you to achieve a positive operating model, or it can be used for an extended period of time as a longer-term cash flow management tool.