Small businesses rely heavily on their employees in order to function successfully. Unfortunately, since so many companies operate at a thin profit margin for the first few years company owners often run into payroll problems. This can be particularly dangerous for new companies which could fold if workers don't receive their wages on time. To solve payroll problems many business owners are trying invoice factoring to free up working capital and pay their employees quickly.
All About Invoice Factoring
Invoice factoring is an agreement where a company sells the value of its outstanding receivables to a third-party firm. The firm then advances the bulk of the receivable amount to the company and assumes responsibility for collecting the payments from the customers. Since receivables factoring is not a loan companies do not have to pass credit checks or meet requirements based on their length of time in business.
How Invoice Factoring Can Help with Payroll Problems
Payroll issues are fairly common for small businesses. This typically happens because businesses use a 30 to 60 day period for invoicing so it may take up to a couple of months to receive payment for work done. In the meantime, the company continues to incur necessary costs such as payroll expenses. With no regular income business owners may not be able to get the money to pay employee salaries which could lead to the business being unable to operate. With invoice factoring, though, companies don't have to wait as long for their funds so there's no danger of halting production due to an inability to pay the workers.
Benefits of Using Invoice Factoring
Using invoice factoring offers many benefits for small businesses. Since it offers immediate access to working capital any payroll problems instantly become a thing of the past. This allows businesses to pay their employees on time and ensures that the company continues to operate. Another benefit of using invoice factoring for payroll problems is that it provides a sense of predictability to the company. Since payroll expenses are typically fixed company owners can use the reliability of invoice factoring to plan ahead for changing costs such as hiring new employees or issuing raises to workers.
If you try invoice factoring to solve your payroll problems you'll be able to get the funds you need to pay your employees quickly and efficiently. Making use of invoice factoring can give you access to the capital you need to make payroll and expand your business.
