You Have Options When Short On a Payroll Period
Local Payroll Pros Discuss Payroll Funding Methods
Even if you run a strong, successful business, there might be time when a pay period rolls around, and you find yourself short on cash. Being in danger of missing payroll isn’t a sign of a failing business in many cases, it can mean there are many accounts due in the coming weeks, there has been a significant investment made into an upcoming project or another legitimate reason, but whatever the case you can’t miss payroll as an employer.
If you find yourself in a scenario where you’re short on cash with a payroll period approaching, you do have options available to keep you from not paying your team members. Payroll funding can be done in different ways, and it’s important to know the pros and cons of each in case you’re ever in need.
Our company provides payroll processing services to businesses here in the Bay Area and across the country, and we work with companies of all sizes and industries. Since we deal in payroll, we have experience advising our clients about payroll funding, and in the sections to follow we will discuss the different options you have when seeking payroll funding.
Payroll factoring involves your company’s soon-to-be due invoices. In many cases, a company who needs payroll funding is in this situation because they have done a great deal of work and they are waiting to be paid for it, so there is a shortage of cash in the meantime. By transferring your invoices to a factoring company, you can receive a large percentage of the money which is due to your company in exchange. This influx of capital can keep your people paid and your business running. The factoring company will then collect on the invoices, and send you the remaining percentage on all invoices they can collect on, minus an agreed-upon fee.
Some people use the terms payroll factoring and payroll financing interchangeably, but there is a big difference between the two services. In payroll financing, a company applies for a loan to cover their payroll expenses through a company which specializes in short term loans for the purpose of payroll. These loans are issued with a short repayment period, usually around a month, and have agreed upon fees associated with the loan. This process is more straightforward, but like any loan, has the potential to significantly harm your business if you aren’t able to pay it back.
Choosing the Right Solution
While no business wants to be in a situation where they need to fund their payroll from outside sources, having the option is a lifesaver in some instances because the last thing you want to do is miss a pay period. The right choice between factoring and financing will come down to your preferences, the status of your business and the amount of money you expect to earn in the short term.
Our team has experience helping people with payroll needs, and if you would like assistance with this decision or want to learn more about our services, don’t hesitate to contact us today.
Social Post: No business wants to be in the position where they must rely on outside sources to fund their payroll, but securing these funds is necessary when the alternative is missing a pay period. In this article, local payroll pros discuss different funding methods and how each can impact your business.