Payroll is one of the most critical expenses your business must cover. If you cannot pay your employees, you will be unable to provide goods or services to your clients and will halt your business in its tracks. Unfortunately, if you have to wait weeks or months for your customers to pay their invoices then you may not have the cash flow to meet weekly or bi-monthly payroll.
Payroll factoring eliminates the wait for payment by tapping into your accounts receivable and converting the invoices into immediate cash. Rather than sitting on invoices as they age out, factor invoices with a payroll factoring company and get cash in 24 hours. Payroll factoring isn’t a loan – so there is zero debt to repay.
A successful payroll factoring relationship, like any business relationship, is built on a mutual foundation of communication and trust. If you remember two fundamental rules from day one, your factoring relationship has the potential to be long and fruitful.
Communication is key.
There is no over-stressing this point. So many otherwise good relationships go sour because of a lack of communication, and when money is on the line you can ill afford to clam up.
Good communication starts with your initial contact. Be clear and open about your business needs and goals, and honest about any potential roadblocks to funding. Payroll factoring is available to businesses at all stages of development, but not disclosing tax or other financial issues can slow down or stall the process entirely, wasting your time and the factor’s. Even if no such issues exist, a factor will not approve you until they have all of the information they need.
You cannot close the lines of communication once funding is established, however. Company needs and circumstances change on a regular basis, and you owe it to yourself and your factoring company to keep them in the loop. Attracting new clients, changing your business structure and other similar changes must be shared with the factor to maintain a healthy relationship.
Also, ongoing communication could mean working out a better financial arrangement for your company in the long run. Regular check-ins with your factor will allow you to make sure you are receiving competitive rates and terms that continue to make your factoring relationship worthwhile. If you have expanded your business or focused on working with fast-paying clients, for example, a yearly discussion with your factor can allow you to negotiate additional benefits if such are available.
Trust goes a long way.
Regular, open communication builds trust. Without trust, your factoring relationship will be tense and likely short-lived, potentially threatening your company’s potential for success.
Your factor will trust you if they learn of upcoming issues directly from you – do not shy away from a tax problem, trouble customers, or other threats to your business. Instead, be proactive and clue your factor in or, if they learn of the issue first, do not bury your head in the sand and attempt to deny it. If you build trust with your factor then you have gained a valuable partner to mitigate problems far more quickly and effectively than if you had to tackle them on your own.
In addition, a factor who trusts you will work to earn and keep that trust, and is far more willing to go the extra mile to help you succeed. Seek to create a factoring relationship that your factor will miss when you are gone.
To that end, take the time to get to know a potential factor before signing the papers. Ask questions beyond the preliminary discussion of rates and terms, and find out who you will really be working with. A low rate becomes far less attractive if you cannot establish a rapport with your factor, and a souring relationship will only make running your business more difficult.
Factor Finders has partnerships with payroll funding companies throughout the U.S., and we will work with you to find the best fit for your company. Contact us today and start building the rewarding payroll factoring relationship you deserve.