It’s no secret that the staffing market is becoming increasingly competitive due to companies having in-house staffing solutions, choosing to hire internally, or turning to their existing talent pool for referral candidates. As an executive, keeping a competitive edge is always top of mind, especially if it’s the difference between achieving your business goals or becoming stagnant.
Being a smaller company also means laying the foundation for future growth through the talent that you choose to bring into your company. As you bring in this talent, your employee compensation for internal and external payroll rises. Are you financially prepared to pay all of your employees consistently?
Perhaps you have a client that is late paying their invoice, or you have an unexpected office expense that needs to be taken care of. This could cause payroll funds to be unavailable. But, hard-working employees need to be compensated despite other financial factors that the company might be experiencing.
What do you do in the scenarios where the funds to pay your employees aren’t liquid?
As a cash flow solution, Payroll Factoring is a type of working capital that is used specifically for the temporary staffing industry. It is a service that allows staffing companies to have access to between 90 and 95 percent of their outstanding accounts receivable upfront so they can compensate their staff and pay for any other expenses they have incurred.
Staffing companies use Payroll Factoring because regardless of if their clients pay in seven days or 90 days, the cash is there for them to meet payroll requirements. By using Payroll Factoring in your overall business strategy, you can grow your staffing company without the financial limitations that come with having available cash for payroll. And, as your company grows, your Payroll Factoring line of credit will grow with you.
Once your account is set up, you simply submit invoices and all supporting time cards to the payroll factoring company for the previous week so you can receive the funds for your upcoming payroll period. Typically, between 90 and 95 percent of the invoice amounts submitted are immediately transferred into your account for use. The remaining five to ten percent of the invoices are held in a reserve account to await invoice payment from clients. If you’d like to know more about the ins and outs of Payroll Factoring, click here.
In this article, we go through why you should be using Payroll Factoring to compensate your employees, to stop worrying about cash flow, and to start using your valuable time and effort for more mission-critical tasks.
Did you know that executives spend up to 20 hours per week working on tasks involving cash flow? This includes payroll, invoicing, managing cash, collections, etc. This means if you’re working an average of 40 hours per week, 50 percent of your time is spent on non-growth activities. Fifty percent of your time is spent on administrative tasks versus tasks that serve your company’s bottom line.
This is not to say that managing your cash flow isn’t important. You need to make sure invoices are being paid, employees are being compensated, etc. However, it’s important to take a look at these tasks and see where you can cut back on time.
Payroll Factoring is not only an option to fund your employee compensation while you’re waiting for clients to pay their invoices, but it with a good payroll factoring relationship it also allows you to decrease the amount of time you might be spending on figuring out how you are going to compensate your employees for a specific pay period. Perhaps you’re taking time to see how you can move finances around or delay other payments so you can make sure your employees are compensated on time. By having Payroll Factoring in place, the task of “finding the funds” and worrying about where the funds will come from, will no longer be an issue as you work through your cash flow tasks. You will merely submit funding requests from your payroll factoring provider and issue employee compensation as needed.
Even if implementing Payroll Factoring meant cutting down your cash flow workload by 20 percent, that would mean you have an average of four hours per week that you could spend generating leads, coaching your sales team, and growing your business. What kind of growth could you achieve by putting four of your weekly work hours towards bottom-line tasks? forty-six percent of workplace stress is associated with workload, according to The American Institute of Stress. By eliminating the stress of where your employee’s compensation will come from, you are not only freeing up more of your work hours, you are also increasing your overall productivity, and in turn, lowering your total operational costs.
Using your valuable time in the areas that will aid your company in growth and competitiveness is what will allow you to separate yourself from the noise and become a standout staffing firm.
If employees are not paid, they will take their careers elsewhere. It’s as simple as that. As a staffing company, you know the challenges of not only obtaining top talent but also holding on to them in today’s competitive market. Being in the staffing industry, you know the importance of a competitive compensation plan when attracting top performers to a company.
While compensation is not the only factor you need to focus on when looking at your employee satisfaction, it is a significant factor when it comes to retaining your staff. In fact, Greg Scileppi, President of Robert Half, International Staffing Operations, stated:
"CFOs should be aware that salary and benefits are playing a larger role than many executives think when it comes to employees leaving their jobs. Talented workers with in-demand skills who feel they aren't being compensated fairly know they have options, especially in the current hiring environment."
With compensation being a more significant factor in employee happiness than ever before, it is that much more important to not only make sure your employees are fairly compensated but compensated on-time and in the amount they are owed for their work. By paying your staff on time and in the amount within their contracts, you are building trust and loyalty between your company and your employees.
Top performing candidates know they have options. And, they will not hesitate to exercise their employment options if they feel that they are not valued at their current company. In 2018 alone, voluntary turnover accounted for 16 percent of all company-candidate separations in North America. That’s in comparison to involuntary turnover, which is at 6 percent, and retirement, which is at 1 percent. This means that more and more candidates are willingly leaving their roles and their companies for other opportunities that offer more compensation, more opportunity for growth, and more overall value to their careers.
To retain your talent and stay competitive in today’s market, companies need to ensure they are taking all the necessary steps to make sure their team is happy. This includes proper compensation.
Imagine being an employee who has just spent 80 hours over the past two-weeks - assuming they are a full-time employee - and your company approaches you to let you know that they are lacking funds and will need to compensate you next week. How much value does that instill in you? How does that impact your life outside of work?
Another critical part of showing that you value your employees is showing them that you care about their lives outside of work. By not being able to compensate them, you are hurting their personal life, their ability to pay their bills, etc. You are sending the message that you do not value their time and effort at work and that their life outside of work isn’t important.
By setting up a Payroll Factoring line of credit, you are able to compensate your employees on time, show them that they are a valued member of your company and that they are appreciated as a person and not merely an employee. When you put all of these aspects together, you achieve a decrease in employee turnover and an increase in employee loyalty.
Building and nurturing a positive relationship with clients is what is going to make or break your company. With technology today, it is easy for someone to go online and post a bad review or rave about a poor experience they’ve had with you.
To keep a strong relationship with clients, you need to make sure they understand that your partnership goes beyond money. This is not to say that the monetary aspect of your arrangement isn’t essential, because it is. However, there is also the partnership side. You and your client have decided to partner and work towards a common goal. By providing them with contract workers, you are helping them get to their goals. And, by choosing to partner with you, they are helping you grow and achieve your goals.
However, there will always be clients who aren’t able to pay on time or that have extended payment terms. They may have legitimate reasons and they may not. Either way, having outstanding aging invoices on the books, or being paid late at one point or another will happen. Are you financially prepared to continue to pay your staff while you wait for your client to settle their invoice?
Professionalism is of the utmost importance in these situations. If a client isn’t able to pay their invoice on time for one reason or another, you need to have a strategy in place to deal with it. Putting pressure on a client to pay early or even just on time will only make your company look like a needy vendor and, will only hurt your relationship and potentially cause them to look elsewhere for similar services. In these situations, it's critical to have the cash flow you need, regardless of if that allows them to sort out their own cash flow or approval process while you continually pay your employees on time.
However, you’re feeling the pressure because they’re not paying their invoices right away or on time and still you have to pay your staff. How do you handle this pressure without putting it on the client to pay their invoice sooner rather than later? Having a strategy in place to deal with these kinds of scenarios will allow you to be an understanding partner to your client, versus a contracted company who is only in it for the money. Your clients know they can look for the same services elsewhere, so don’t give them a reason to think they need to start looking. Put yourself in the best position you can by having your Payroll Factoring account setup so you’re able to pay your staff and work with clients on how they can settle their invoice should they not be ready to settle it right when it’s due.
What does worrying do for your brain and your body? Allowing yourself to be exposed to unnecessary stressors can have exponential impacts on your overall health. Your immune system becomes less responsive to invaders, you can experience muscle and joint pain, your energy levels can decrease, and so much more. All of these negative symptoms have a direct impact on your ability to think critically and make business decisions, successfully lead a team, and ultimately, grow your business.
The bottom line is that your time is valuable and should not be spent worrying about how you are going to make payroll. As an executive, it is recommended that you offset stressors that you do not need to shoulder. In an interview with Academy of Achievement, Jeff Bezos, Founder and CEO of Amazon, talks about addressing stressors head-on and eliminating them:
“Stress primarily comes from not taking action over something that you can have some control over. I find as soon as I identify it, and make the first phone call, or send off the first e-mail message, or whatever it is that we’re going to do to start to address that situation — even if it’s not solved — the mere fact that we’re addressing it dramatically reduces any stress that might come from it.”
Whether or not you have the funds readily available to make payroll is a stressor that can be controlled if the necessary steps are taken. By understanding that making payroll is an unnecessary stressor that takes up your valuable time and intellectual brain power, and taking steps to eliminate that stress, you can refocus yourself and achieve the goals that are more important to your business.
One of our current clients had been playing with the idea of acquiring funding for her business for quite some time. She had already filled out an application with another funding company when we started speaking with her. Through conversations, we understood exactly what she needed and where her unnecessary stress was coming from. She was holding stress about paying her contractors on time! She decided to partner with us and has been reaping the rewards ever since.
“I had been considering using a funding company for my small business for about two years. I am so glad that I did! The approval process was fairly quick after I provided all of the required documents. I was even able to get funded during the same week after being approved! No more waiting 30-45 days to get paid, and this is really important as I have contractors that I must pay,” says small business owner, Thea Benham.
As a result of choosing to go with Payroll Factoring for her business, she no longer has to worry about paying her contractors. The funds are merely there and ready for her to use! She can now take that intellectual power she has regained from offsetting the stress of making payroll and put it towards other tasks that she needs to complete so she can grow her business.
With competition being fiercer than ever before, it’s crucial for companies to establish a strong business foundation early on. That means having the right staff, creating a healthy work environment, and getting all your finances in order.
Without a strong foundation in place, a business will either struggle to grow or begin to crumble as growth happens. Payroll Factoring is an excellent way to help ensure you are always making payroll, even when clients don’t pay on time. It frees up your intellectual power as a leader and executive so you can focus on mission-critical activities such as: coaching your team, generating leads, and achieving your business goals. It allows you to maintain a partnership based relationship with clients, versus a company that is only in it for the monetary aspect. And finally, you retain the staff that you’ve worked hard to acquire.
The simple step of making sure you have funds available for payroll offsets an incredible amount of tension and stress that hinders your company’s ability to separate itself from the competition and grow successfully. Just imagine what you could accomplish if you had more loyal employees, if you had stronger relationships with clients, and you didn’t have to worry about making payroll. What more could you accomplish in your business?
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