Payroll funding companies and their pitfalls

Payroll companies frequently offer funding finance in addition to their payroll services and whilst on the surface this may seem a useful option there are a number of drawbacks, some of which are obvious but some less so.

Many payroll funders will insist that the invoices are raised in their name not yours, with the most obvious drawback being that you lose your own identity which is subsumed into that of the payroll funder.

A less obvious drawback is that the payroll company is raising it’s own working dangerous payroll practicecapital by means of a back to back factoring arrangement with someone else. This means that if the payroll company has problems with another of their clients and the factoring company end up restricting their cash flow it could rebound on you even though your company was not the cause of the problem.

In a worst possible scenario the payroll company could have such a poor relationship with their factoring company that they end up going bust and this has happened on more than one occasion causing all sorts of problems for the recruitment companies who were completely blameless and didn’t even know that they were unwitting parties in the payroll company’s factoring arrangements.

Some of the larger and better known payroll companies can cause problems in different ways as per the attached link

Recruitment Factoring Solutions