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• 11 May

  Payroll Finance To Fund Growth And Staff Wages

  

  Payroll finance can be used to fund growth and pay staff wages, as was the case for this recruitment company operating in the healthcare sector. This type of funding can be an essential way of improving the liquidity of any recruitment company.

  Payroll Finance To Fund Growth And Staff Wages

  Our client was a temporary staff agency providing health care staff. They were expecting to grow their annual turnover to more than £1M pa, which could cause liquidity issues as the company needs to consistently pay staff wages.

  Liquidity Problems

  Liquidity is a measure of how able a business is to pay its creditors as they fall due. A liquid company will have cash on hand to be able to pay these debts, this may be in the form of financing facilities or cash held in their bank account. An illiquid company is one that needs more cash than it has available to meet its creditor's bills.

  One option is to leverage the book debts of a company to release more cash. Normally, companies have to wait for customers to pay in order to access the funds from their sales. However, by using payroll finance a recruiter can get access to money against their sales invoices immediately after they are raised, i.e., before the customer pays. This can improve their liquidity.

  Maintaining A Liquid Position For Fast Growth

  This issue is exacerbated when a company is rapidly growing. The faster a temporary staff agency expands, the more cash it will need to meet its staff wages. One benefit of the funding from payroll finance is that it increases as sales increase. Therefore, it can keep pace with your expansion and growth.

  Payroll Paperwork Management

  Another burden for staffing agencies is that they have to complete a lot of paperwork for their staff payroll. This will include the production of wage slips, P60s, P45s etc. This particular funding facility also outsources that function so that the agency directors can focus on sales rather than paperwork.

  We were able to help our client find a selective invoice financing facility with payroll via an independent specialist. This will allow them to select invoices to be funded when they need working capital. This will improve their cash flow whilst they grow. Additionally, they have the benefit of the payroll management service to reduce the paperwork burden on their team.

  By Glenn Blackman