For most businesses, the function of payroll is directly related to an income source allowing the system to flow easily from cash in to payroll out. Unfortunately, for staffing agencies, this model does not work. Payroll, as well as other expenses, is due several weeks before the agency receives any payment from the client. For this reason, staffing agencies need to look at payroll financing to make sure the expense of employee payroll is covered.
There are many important reasons for a staffing agency to use payroll financing.
1. First and foremost, whether or not you have been paid by the client, you are legally obligated to pay your employees. The morale and legal ramifications of not paying your employees, or dealing with their payroll deductions and tax obligations are obvious: potential fines and legal repercussions. In addition, the damage to the reputation of your business with potential workers and clients is also a consideration if you are not paying your employees on time.
2. Government regulations and legislation regarding payroll changes frequently. Legislative changes can be complex and time consuming to maintain compliance. By using an outside company to provide your payroll financing, you have passed on the responsibility and you allow them to handle all of the T4s, ROEs, government remittance and employee deductions. As changes take place you will be sure that your provider has handled the issue appropriately and in a timely manner.
3. Payroll financing allows you to use your available capital in other areas. Freeing up money by using by financing your payroll will provide you with many opportunities to grow your business. Money once used for payroll can now be put into marketing, investments and business improvements.
4. Every client has his or her own preferences regarding invoicing and payment options. While some clients may have a quick turnaround time from when they receive your invoice to when they finally make payment, there will still be lag time. Some companies wait as long as ninety days to make payment and that is a long period of time to wait for payroll funds. By financing your payroll, you make sure that you are able to meet your payroll obligations without the worry of when the client pays you.
5. There are enough payroll financing options available that you are certain to find one that suits the needs of your business. Everyone runs their business in their own way. Using a payroll financing provider will take a large issue off your plate giving you the flexibility to focus on other areas of your business. With the number of problems and issues that arise from operating a temporary staffing agency, you need to consider doing whatever you can to maintain your focus in so many different areas.
The Staffing Edge, Canada's largest back office solution provider dedicated to the staffing industry offers support to over 125 contract staffing firms. Even if you are not currently using the services of the Staffing Edge, don’t hesitate to call for advice regarding payroll financing options, payroll processing and a host of other services to help you with your staffing agency needs.