Employees are the circulatory system of your business. They help products and services flow through your operation, and they take care of all the details along the way. You make payroll a priority, but something may happen to affect your cash flow. A customer may not have paid for a purchase, or your bank has decided not to extend your line of credit. You need alternative financing to get the cash you need, and one option is factoring, turning your outstanding invoices into collateral for a short-term loan.
Employees Free Up Your Time So That You Can Focus on Growth
When your business is small, you find that you do most or all work on your own. You may have a partner involved, but even two people carrying the burden of the work can find themselves at a disadvantage. You may feel as though you don’t have enough time to do the creative stuff because paperwork and shipping must be done. All companies start small, but success comes with growing pains. When you start asking yourself if you have enough time in the day to do everything, you know that it’s a sign to look for more help.
Bringing on employees means adding more cost to the business, but it’s also a sign of success. You can now spend more time on planning the next step of your business growth because you have more able hands to do the work you once did. Employees who do their job well also become invaluable to the business, so you naturally want to make sure they’re paid as promised to keep them working for you. And those employees who start with the business sometimes grow along with it, helping you make the changeover from a small operation to a medium-sized one.
Take Care of Your Employees
State and federal laws dictate the benefits that you must offer to your employees. These benefits include medical and family leave, and overtime and holiday pay. When you hire someone, you are entering into an employment agreement with them, one that both of you have to honor. The employee honors the agreement by performing the job duties per the job description. You honor it by making sure the employee has a safe working environment, steady pay, and reasonable terms of employment. Both of you rely on the other to keep business operations flowing smoothly.
How you go above and beyond these offerings is up to you. The amount of vacation time you offer and the way your company handles emergency absences and short- or long-term leaves for those who need to take care of personal issues, deal with health insurance, and more are all company policies that you create.
For example, you have a business with fewer than 50 full-time employees. By law, you’re not required to offer them health insurance. However, you feel that the employees have brought value to your business, and you decide to offer them the opportunity to take part in a group policy that costs less than policies on the health insurance marketplace. Those who elect health insurance coverage are more likely to stay loyal to you because you’re taking care of their needs in this way.
Make Sure Payroll Is Always Issued On Time
You’ve budgeted your income to make sure payroll is at the top of the list of outstanding debts, but payroll is a variable amount from pay period to pay period. For example, you want to make sure that you can cover a sudden increase in the amount because of overtime. Additionally, you manage the flow of transactions, but what happens when customers don’t pay the way you expect them to and your payroll increases due to overtime demands?
First, meeting demands by relying on what should be guaranteed income is normal for any business. What happens though is that a customer may not always paying an outstanding invoice on time. But you shouldn’t think that you have to shortchange your payroll until your customer pays you. Take the invoice and turn it into cash through factoring. Factoring, also known as collateralizing an invoice, allows you to obtain funds sooner than you would if you waited for a customer to pay an outstanding invoice.
Factoring Is a Cost-Effective Method of Funding
FSW Funding provides immediate funding to small businesses by advancing funds against an approved commercial invoice, known as factoring. The rest of the invoice, less factoring fees, will be given to you when the invoice is paid in full.
You’ll take a little less than face value, but you get most of the outstanding debt paid without applying undue pressure on your customer. All that’s required is an established relationship between you and your client. An established credit rating isn’t necessary to receive factoring, but a brief look into the financial history of your client by the factoring agent will ensure the credit worthiness. You receive funding once the factoring agent verifies the information received from you.
When you factor an invoice, you are turning it into collateral. The invoice itself is an intangible item that lets you collect on an outstanding debt. When customers require payment terms, you can use invoices as collateral for a short term loan from the factor. The factor will advance you a percentage of the outstanding invoice and when the customer pays the invoice, you get the remaining amount back less the nominal factor fee.
Sometimes, unfortunate circumstances happen to good businesses, and employees take less pay because not enough money becomes available to meet full payroll. Factoring eliminates the need for you to reduce their pay and make up for shortfalls later. While you have to budget for the percentage that’s taken out of the total by the factoring agent for its services, it’s a fair trade for not paying interest over time on a loan from a bank.
At FSW Funding, we help small businesses by advancing funds against qualified commercial invoices. Contact us to learn more about how we can help you cover a gap in your business income in less time than a bank can.