For an employee, there’s almost nothing worse than realising that the money you’re owed by a company – money that you worked hard for day in and day out to earn – has been delayed by even just one day, or perhaps even longer. The food industry is a prime example, and in some ways, it is actually much worse than many other industries. Many of the employees in the food industry balance their budget based specifically on the day when they’re supposed to be getting their money, and they trust the company to be true to their word. If they end up with a paycheck that is less than what they expected, or if their payment gets delayed, it could lead to much bigger problems down the line.
Unfortunately, these kinds of payroll problems aren’t uncommon, even when it comes to large businesses in the food industry. For these situations it’s often best to opt for solutions such as payroll factoring, but it’s just as important to understand why it’s necessary. After all, the payroll is an incredibly important aspect of a company and one that needs to be perfect every single time.
The problems that businesses in the food industry face
You can probably imagine how badly most employees in the food industry require the money they’re being paid. More often than not, many employees in that industry work very hard and what keeps them going is the knowledge that they will be paid for their hard work and commitment. The results can be catastrophic if the employee is not paid on time, or paid less than what was promised. The disgruntled employee can spread dissent, and it’s very unlikely that only one employee will be having problems. Issues with payroll often affect a good number of employees – and when this happens in the food industry you can expect heavy consequences. There have been companies that have been brought to their knees, having been sued by their employees for mistreatment and unfair wages. It is certainly no joke, and it is something that needs to be addressed.
The gap in cash flow
There are times when small to medium sized businesses find themselves suffering stagnation. At first when they were building popularity it might not have been too bad. Now that the demand is growing, and supply needs to grow with it, suddenly there isn’t enough cash flow to go around. This slows down revenue as more and more opportunities fly by, and before anyone knows it the business can’t seem to make any progress when it used to be so easy. Imagine having this kind of problem while at the same time being required to pay your employees in a timely fashion. If the business were small enough that your employees were actually friends, this might be understandable. But in a professional situation, this is completely unacceptable.
What is payroll factoring?
Mentioned earlier as the solution, payroll factoring is something that your business can use if you utilise invoices. As a matter of fact, these unpaid invoices are often the very reason businesses suffer stagnation in the first place, especially in the food industry. What payroll factoring does is simple; the factoring company will buy your unpaid invoices in exchange for an advance on what you were supposed to receive based on them. Of course, there will be a certain percentage of the invoice that you will not be getting back, but by doing this, the factoring company will focus on making sure that everyone in your company is paid.
Time is often more precious than money
The reason why some companies go for payroll factoring despite knowing that they have to pay part of their invoices to the factoring company is because they’re able to give them time, something that is considered much more precious than the money itself. By utilising the time afforded by the advance in payment, the company is able to pay their employees, but it doesn’t stop there.
The entire reason a business might stagnate to begin could be due to unpaid invoices that can take a very long time for customers to pay. Having this kind of money at hand means expansion and improvement, among others, become viable options. They can take advantage of certain seasonal products and get ahead of the competition if they know that their customers will purchase these products in large quantities.
The food industry can benefit from payroll factoring
For such a time-sensitive industry, it’s important that everyone gets paid on time, including the company itself. Unfortunately, without any kind of financing this is unlikely to happen, even if the company itself is popular. This is the main reason why some popular businesses still go under despite seeing a decent amount of business. They simply didn’t have enough cash flow to properly sustain themselves in order to make progress and grow based on the needs of their clients. Through payroll factoring, this problem is quickly dealt with, and the company is given a true chance at finally succeeding. It’s important to note that this isn’t a magical solution that will change the company overnight. They have to know exactly what they want to do with the money they receive via the advance of the factoring company in order to take advantage of the situation.
To conclude, the problems that come with not paying your employees on time can be catastrophic, no matter the size of your business. In the food industry the consequences are severe enough that some businesses don’t even get a chance to bounce back when they first start having these problems. This is why payroll factoring should be considered over the alternatives, such as taking out a loan. At least when it comes to factoring, there’s no chance the business will go under, especially if you have a non-recourse agreement. This means that if your clients don’t pay their invoices, the factoring company shoulders the cost!
Author: Oliver Curtis
Hi there. I’m Oliver. I’m just a young boy from the outskirts of… Okay, that’s a lie, I’m not a young boy anymore, although I certainly feel that way at heart.