It's not uncommon for a growing business to get held back by cash flow gaps. Credit terms on invoices of 30, 60 and even 90 days can severely impact a business, restricting their ability to manage orders, hire new staff and generally expand their operations.
The recruitment industry is no exception. Recruiters who manage a contractor have the inherent problem of having to meet their own payroll before the client organisation pays them. Many recruitment companies, as well as outsourced payroll firms turn to payroll funding to deal with this unwelcome cash flow gap.
Close that gap with payroll funding
Payroll funding offers an alternative to borrowing money from banks or invoice factoring firms, as it allows recruitment companies to access funds against unpaid invoices as soon as they are raised - providing them with instant cash.
A line of credit secured by your receivables allows you to draw down and repay funds when required, without the burden of putting up property as security. This funding option extends a revolving line of credit against the outstanding balance of client invoices.
They only draw down the funds as and when they need them and just pay the interest on that amount. This means staff are paid on time, every time, and the debt is repaid once the client settles the outstanding invoice.
Is payroll funding the same as factoring?
They’re both based on a business’ accounts receivable, but that’s just about where the similarity ends. With factoring, you sell your invoices to a company who takes responsibility for collections. They advance you a large part of the total, and once it’s been collected they take their cut and give you whatever is left. What makes factoring so unappealing to many businesses is the disclosure, that is their customers knowing exactly what’s going on, because as we said the factoring companies are the ones chasing those debts.
Payroll funding is more like invoice discounting as it offers a revolving line of credit, which can be accessed as and when it’s needed. And now with the wonders of modern technology, the whole process is a lot more manageable. In the past it was labour-intensive, with admin such as the uploading of invoices and reconciliation often requiring many hours legwork each week. With cloud accounting integration, lenders (like us!) can connect up directly to your Xero or MYOB account, take a quick reading and present you with an instant offer.
Get a Waddle offer!
To see how much working capital you can get access to, just connect your cloud accounting package for an instant offer. To qualify for a Waddle line of credit you'll just need to ensure you pass the following:
- Been in business for a full trading year
- Have an annual turnover > $250,000
- Use cloud accounting
- Sell on credit terms
- Have bookkeeping up to date at least weekly