Outsourcing Payroll and Payroll Funding
When you’re running a recruitment business, dealing with admin can feel like dragging an anchor along behind you. It’s hard to push forward when you’re being pulled back; so anything you can do to streamline the process is an investment in your company’s growth.
One of the biggest headaches for a recruitment agency is dealing with cash flow. No matter if you’re just starting out or have been in the business for decades, it’s a headache you just have to deal with. Or is it?
Should I Outsource Payroll Funding?
By outsourcing your payroll funding and support services you’re free to focus on growing and managing your business. You’ll have peace of mind knowing that tasks such as payroll and invoicing are taken care of.
If you’ve just started your recruitment agency, you’ll certainly have your hands full already. Adding organising payroll on top of that can be too much for any business owner. A crucial part of running a recruitment business is staying compliant, and anything that harms your reputation in the early years can hamper your development.
When building a business around contractors and temporary workers, your cash flow can be hit hard if you don’t have plenty set aside already. You’ll have to pay your workers before clients have paid you; if you don’t have the money ready, you won’t be able to pay them. That’s where we come in.
How does Payroll Funding Work?
By outsourcing your payroll funding using Back Office Support Services, we’ll make sure you always have the funds to pay your temporary workers, then when the money comes in from clients, we collect it on your behalf. Unlike with other payroll support services, Back Office are a one stop shop. There’s no need to obtain the financing yourself, it’s all handled by us.
There are many types of payroll funding. This includes:
For a growing recruitment business, the latter is all you need, for the reasons we’ve talked about already. But for the sake of fairness, let’s break down the other payroll funding options, and explain how they work.
Bank Loans for Payroll Funding
Many banks offer ‘payroll loans’ for small businesses. It’s a short-term loan designed to help a business when working capital falls short. If there are unexpected delays in clients’ invoices or if your business experiences a seasonal loss of sales, a payroll loan will keep you afloat and help you pay your temporary workers.
However, these loans are designed for emergencies only. They shouldn’t be used regularly, and you will struggle to take out multiple in succession. There will also be interest to pay; the amount depends on the bank who provides the loan.
What is Invoice Financing?
Invoice financing, also known as invoice discounting, involves borrowing money against your company’s outstanding invoices. By showing the discounting company that the required funds will arrive soon, and using the invoices as collateral, you’ll receive a percentage of the total invoice value as a business loan or line of credit.
This percentage varies between providers but is commonly around 80-90% of the total amount you’re due to receive. This means that if you need the entire amount to cover costs, you’ll have to work around it as best you can.
When the invoice payment term ends, and you’ve received the full amount from your clients, you repay the lender. As with bank loans, there will be interest to pay plus service fees.
Again, this solution is designed for emergencies, to be used when there are delays with client invoicing or if funds are needed sooner than usual.
What is Invoice Factoring?
This payroll funding solution may be similar in name to invoice financing but works in a very different way. It’s also one of the services we offer.
Invoice factoring involves selling your unpaid invoices, as well as control of your accounts receivable. We then invoice for you and send you a pre-agreed percentage of the invoice amount up front. Many factoring companies only provide 80-90%, but we guarantee the full 100% minus our fees.
This is beneficial for many companies as it removes the need for chasing payments, as the factoring company will handle that. This takes the pressure off you and can help improve your cash flow, and thus help you grow.
The Best Method for Payroll Funding
These different methods all have their pros and cons. Loans and Invoice Financing are designed to be used short-term, and only when absolutely necessary. Whereas invoice factoring is designed to be a long-term payroll funding solution. Some of our clients have been using our factoring services for 20+ years.
For long-term support with payroll funding, you need a specialised payroll finance provider. They handle the payroll for your temporary and contract workers for you and ensure your they are paid when they should be.
However, these aren’t without their issues.
Like any business, recruitment payroll funding companies can have issues with admin, poor service or need the attention of you and your team more than they should. Even the biggest names in the business can have issues like this and expect you to accept them purely because they’re well established.
That’s what Back Office Support Services do differently. We are one of the UK’s leading specialist providers of funding and admin support for the recruitment industry. Our more personal approach makes us more reliable, meaning we build a relationship based on trust with all of our recruitment agency clients.
Unlike other support companies, where it’s common to get lost in emails or passed around from department to department trying to get simple issues resolved, Back Office provide two points of contact. Your dedicated payroll account manager will know your payroll requirements inside out, spotting anything that is out of place or needs addressing quickly. Your credit controller will ensure timely payments and will resolve any account queries.
What sells us best is our reliability, attention to detail, and personal approach; don’t just take our word for it either! The recruitment companies we work with all provide sparkling testimonials that show that we do things the right way.
If you’re already outsourcing your payroll funding but aren’t happy with the service you’re receiving, it’s easier than you think to switch providers. When you find the perfect team, you know you can trust, you can focus on growing your business, without worrying about the next payday.