Take Full Advantage of Services Offered by Your Payroll Vendor

Most business owners realize the obvious benefits of outsourcing payroll, such as saving money—outsourcing can save your company up to 30% over the cost of in-house processing—and saving time. But you may be unaware the many things your payroll service can take off your hands, from annoying little tasks, to key procedures, such as:

• Paycheck processing for multiple company locations can be easily handled by your payroll supplier. Some vendors have a branch in every major city. Smaller suppliers will distribute paychecks to multiple locations via an overnight delivery service.
• Direct deposit, a feature that most employees appreciate, and that smaller businesses are unable to offer through an in-house system. Funds deposited directly into employees’ bank accounts are often available a day earlier than a paper check would be.
• Check stuffing, for those employees who prefer a paper check; your payroll service will handle the time-consuming chore of printing checks and placing them in envelopes.
• Special reports. Ask your payroll vendor for a list of their report-writing packages. This service can be of real value if your company needs any type of specialized report. Again, many in-house payroll systems do not have this capability.
• Data backup. You won’t need to be concerned about losing payroll information, because most payroll providers back up their data regularly.
• New employee reports. The law in most states requires businesses to file a report for each new hire. Your payroll service can compile the data of all your new employees and submit this information to the government electronically.
• Tax services. Save yourself the anxiety of possible penalties due to inaccurate tax payments by having your payroll provider remit all employee taxes.
• Expertise. You will have a team of payroll processing experts at your service. Your payroll provider will usually be able to answer your questions over the phone, and some will even come to your location for a consultation.

These are just a few of the services your company can take advantage of when you outsource your payroll. Your provider can also take over many processes normally handled by your human resources department, such as the administration of 401k plans and other benefits, saving your company even more labor dollars.

Factoring Can Help Cash Flow

Managing cash flow is a major consideration for many businesses. Cash flow, in essence, is a balance of money coming into the business and money going out of the business. Money comes into the business when goods or services are sold. Money goes out of a business to pay for things like inventory, payroll, capital expenditures, and more. Cash flow management can be tricky and even well-established businesses can have a hard time managing cash flow from time to time.

Fact: when businesses extend credit (which occurs anytime a business has to send an invoice for products or services), it will have 10 to 20 percent of its annual sales stuck in accounts receivable. That’s a significant amount of money each year!

When a business needs assistance managing their cash flow, the business can turn to a variety of resources, including banks and other lenders. However, many businesses either can’t get funding through a traditional lender, or would prefer to get funding through alternate means. Factoring is an alternate mean that is very appealing for many businesses. Factoring, in essence, is “cash without borrowing.”

Here’s How Factoring Works

A business sells its accounts receivable (outstanding invoices) to an investor (factor) at a discount rate – usually of about four percent). The factor then collects the money from the customer. Because the business sells the accounts receivable at a discount, the investor is able to collect on the discounted margin. That margin is generally based on a percentage of the total cost of the invoice, but may also be based on a flat rate.

Factoring is a very common practice that has been around for thousands of years, according to Vital Force Factoring. It is generally a business-to-business service, but consumers also use factoring systems anytime they make purchases with a credit card. In the case of a credit card arrangement, the credit card company will pay a retailer for goods when a consumer makes a purchase. Therefore, the credit card company, acting as a factoring agent, serves as a middle man and is in charge of managing payment for a product or service. The factoring system works in much the same way as a credit card system in business-to-business transactions.

Benefits of Factoring

Many company, such as Florida-based First Capital, are in business to buy receivables in exchange for immediate cash – as much as 97 percent of the total amount of the invoice. Some businesses use factoring for funding when they are unable to get bank loans or loans from conventional lenders. In a pinch, some businesses even use factoring to pay for inventory, payroll, and other immediate needs.

Factoring can also help businesses to improve their invoice collection rates as factoring companies handle all aspects of accounts receivable for a company. Some businesses enlist the help of factors if they are unable to collect on an invoice. The factoring company will then use its own resources to collect on the invoice, allowing both the business and the factoring company to receive payment.

Many factoring companies will also perform credit checks on new customers in order to determine the risk associated with engaging in a partnership with the new customer. This credit check can also help businesses to assess a credit amount or interest rate for the new customer.

When looking for a factoring company, look for a company that has a high advance rate for invoices, offers fast payment on invoices, has appropriate invoice management tools, and has a good reputation for collecting payment from customers. It may be helpful to review several different factoring companies before selecting the company that’s best for your needs.