Contingent labour workers play a crucial role in the economy. We’ve seen in 2022 more than ever, how important it is for various sectors, from travel, to technology or healthcare to have access to a skilled, talented and flexible workforce.
This invariably translates into business: according to a report published by the Staffing Industry Analysts (SIA) in March 2022, annual sales revenue in the recruitment and staffing sector in the UK was up by a staggering 80% for contract placements. Given the size of this opportunity, it’s important for recruiters to ensure that they have the right systems in place to support this flexible workforce, particularly when it comes to ensuring they are paid on time and in full.
In payroll, consistency and compliance are key, and you can’t fulfil your duties without a steady cash flow. So, as a business, how can you deliver wages to your contractors when you can sometimes wait up to 90 days to collect invoice payments from your clients? The answer lies with payroll funding.
What is payroll funding?
Payroll funding is a form of financing that allows organisations to release capital from their unpaid invoices and pay their workers on time. More often than not, businesses collect payments across longer intervals than payroll is issued, which causes sizable cash flow discrepancies. As a matter of fact, our research shows that over 37% of medium-sized businesses say it takes them on average 90 days to pay contractors, despite most permanent staff in the UK being paid a monthly salary. 28% of small to medium-sized businesses say this is due to cashflow issues.
Also known as payroll financing, this type of invoice factoring helps facilitate a reliable cash flow as well as a sustainable level of growth. It involves selling your unpaid invoices to a third party in exchange for an advance on your cash. Unlike traditional forms of financing, a payroll funding company can approve the process in a matter of 24 hours, giving you quick access to the cash that you require.
Payroll funding for recruitment agencies and consultancies who place contractors and freelancers
Payroll funding for staffing and recruitment agencies is essential as the recruitment sector can often deal with significant cash flow issues. This boils down to late-paying clients, seasonal demands, or rapid periods of growth. Agencies are responsible for paying temporary staff from their pocket whilst managing their expenses and attracting new business – all at the same time.
Payroll funding for start up staffing companies is even more useful, as smaller companies may not have the resources to constantly follow up with customers for their payments. Invoice finance companies such as Sonovate can take over this burden and ensure debts are paid on time, freeing up valuable time.
How it helps improve cash flow
If your clients require payment terms of up to 30, 60, or even 90 days, you could be waiting up to three months to receive outstanding payments whereas you’ll need to settle your contractors’ payroll much sooner. Given these circumstances, many agencies are confronted with late payments and substantial gaps in their cash flow which limits their ability to place more candidates or invest to grow their business.
Thanks to payroll funding, you won’t need to sacrifice working capital that could be used to finance projects and take on new lucrative opportunities. By streamlining and optimising your revenue you can cover your expenses and boost your cash flow.
Why choose Sonovate?
So, how exactly does candidate payroll funding for staffing agencies work? If you are a Sonovate customer, you can raise money via invoice financing to accelerate cash flow and plug the gaps between paying contingent labour and receiving payments. This is done through our industry leading technology platform and supported by our team of experts. Based on the Sonovate solution that you have selected, we will pay you on the same day, the following day, or on weekly basis and then wait for your clients to pay us back.
To support our customers even further, particularly smaller agencies who many not have the qualified resources to manage contractor PAYE, we have in-house specialists to do just that. Our certified team is up to date on the latest regulations, and our systems allow you to manage the process digitally, from timesheet to payments and payslips.