What is meant by payroll funding?
Payroll financing or payroll funding is used by a company for selling its invoices to receive instant cash for satisfying its payroll requirements. The process of payroll funding functions by providing capital for paying workers or temporary staff before the company is paid by its clients. This procedure helps the companies to fulfill their payroll requirements every single week.
The payroll funding process
- The staffing payroll funding will be delivering and invoicing for services.
- The staffing company is going to sell the accounts receivables to one of the payroll funding companies out there for keeping the cash flow and satisfying payroll.
- As much as 90% of the invoice will be advanced by the payroll finance company and this can be used for covering payroll.
- After you are paid by your clients in full, the transaction will be settled by the payroll funding company by depositing the rest of the balance of the invoice into the bank account of your company.
What is the average cost of payroll funding?
In general, the average cost of payroll funding will be varying somewhere between 1.3% and 2.5% every month. Nevertheless, the discount fee will be provided by factors as low as 1% which will depend on the end customer’s credit quality, the sales volume, as well as how fast they’re going to pay the invoices.
Below, we have mentioned the advantages provided by payroll funding at present.
Benefits of payroll funding
1. Payroll funding on the same day
After establishing an account, a copy of the invoice with backup documentation will be received by the factoring company by approximately 10 AM. The funds are going to be dispensed to your account on most occasions by 4 PM on the same day. In this way, you will get the money within 24 hours.
2. No hidden fees
In payroll funding, no hidden fees will be involved. As compared to conventional financing options, the factoring companies are quite straightforward. Pick factors that have been in business for quite some time and this can provide you with the best suggestions on solutions related to finance.
3. Selection of the most competent payroll processor
A lot of factoring companies might like the staffing payroll funding to place the payroll processing with them. Nevertheless, you will come across factoring companies that enable the stuffing businesses to select the most effective payroll processor out there which will be able to handle the payroll funding expertly.
4. Remarkable customer service
Work with those factoring companies which are operating for quite a while. A fantastic reputation has been established by these companies by offering remarkable customer service. The funding procedures are handled by all the executives proficiently.
5. Allows you to expand your business
With fewer burdens on their shoulders, it will be possible for the companies to focus on a fresh project or order. Payroll funding will provide them with the confidence to employ fresh staff for fulfilling fresh client orders while not losing their gifted human resource because of a deficiency of funds.
6. Simple to obtain
It is quite simple to get payroll funding using factoring invoices. A loan application to the bank is going to be a complicated and lengthy procedure. On most occasions, this tends to help the startups and small businesses out there. This is because they are not able to fulfill all the specifications for a bank loan and become stuck because of a deficiency of funds. Only credit-worthy clients will be required when it comes to factoring services.
7. Enables you to offer competitive terms to the customers
In most cases, commercial clients prefer paying within 30 days to 60 days. It becomes quite difficult to accept this as a small business or startup since you need to pay your employees every week or even bimonthly. However, payroll funding using invoice factoring will help you to offer this competitive term to your customers. This will enable you to include more customers in your company.
8. No long-term contract
Unlike other funding options, no long-term contracts are there in payroll funding.
9. Paves the way for traditional financing solutions
It has been found by lots of businesses that factoring can be a stepping stone for transiting to a more affordable financing resource. Factoring enables you to create a track record to become entitled to one more financing option.
10. Inexpensive rate structure
Although a market discount rate will be somewhere between 1.25% and 2.5% every month, you will come across many factoring companies which provide rates of 1% every month.
Staffing payroll funding for lawyers
Being a lawyer, you have got lots of responsibilities on hand. In case you are operating your own law company, your duties might consist of managing the staff as well as running payroll apart from serving your customers. Different challenges will be faced by the law companies, unlike other industries in terms of finding the proper staffing payroll funding. Here, we have mentioned why staffing agency payroll funding has become quite essential for lawyers right now.
1. Provides flexibility
Your office might be having different payment types as well as frequencies that must be considered by you. For instance, your attorneys might be remunerated on a semi-monthly agenda. Meanwhile, the hourly employees of your company such as runners might be paid once every week. You might also pay several contractors as well. For this reason, it is important for the staffing payroll funding to provide you with the flexibility of paying various types of workers on different schedules. However, you might likewise need the capability of compensating employees for mileage and expenses.
2. Tax accuracy
Your employees might be having unique tax withholding requirements. For example, after making $137,700 a team member might discontinue contributing to Social Security anymore. Moreover, in case they make more than $200,000 (single filing) or $250,000 (filing married jointly), they might be required to pay Medicare Tax. Your staffing payroll funding should be able to handle all these complicated tax calculations and aid you in filing payroll tax forms correctly.
Your time is quite precious and payroll does not consume too much of your time. You should pay your team members within a few minutes only, particularly when you are an attorney and would like to invest most of your time for your customers. This will help you to run payroll quite fast and will save you a considerable amount of time in the long run.