When reviewing payroll factoring prospects, ask these six questions to gain valuable information to make an educated decision.
1. How can I be assured my company will receive funds? Your staffing firm needs steady cash flow, so you need to know your funds will arrive in full and on time.
2. How soon do I need to notify you of payroll changes? When you begin payroll factoring, you provide employee names, Social Security numbers and other information so your factor can seamlessly fund your payroll. However, as new employees are hired and others depart, you need to update your factor to avoid payroll hiccups.
3. What kind of relationship do you have with clients? Your factor should be willing to have ongoing, open communication and be reachable if you have questions, problems or concerns.
4. Do you provide recourse or nonrecourse factoring? With recourse factoring, the staffing firm assumes the risk and losses for unpaid invoices. As a result, you must buy back invoices your customers don’t pay in a fixed amount of time. This is the most common form of factoring. With nonrecourse factoring, the factor assumes the risk of bad debt and is out the money it is unable to collect. This is safer for the staffing firm but risker for the factor and is therefore not as common.
5. How much do you advance? Many factors advance 75 to 80 percent of an invoice’s total and keep the rest as their fee. TemPay advances 90 percent or more, among the highest rates in the industry.
6. Do you specialize in my industry? Choosing a payroll factor that specializes in staffing, and even further, to your niche within the industry, ensures you will receive the proper attention and understanding and paves the way for smoother communication.