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The Payroll Problem

Triumph Business Capital

May 14, 2015

Spend less time stressing about making payroll, and more time working on your business.

In February of 2012, when I was eight months pregnant, my husband’s employer filed for Chapter 11 Bankruptcy. We lost our health insurance (even though we had been paying the premiums), and my husband’s bonuses and vacation pay (even though he had worked plenty of overtime). To make matters worse, he and his coworkers did not get paid for the last two weeks before the company folded. Now, more than three years and one more child later, we’re doing fine — but things were pretty shaky for a while.

Most employees don’t think twice about getting paid on time — until the checks stop coming. The problem of “making payroll” is more widespread than you might think. Just over 900,000 bankruptcies were filed in 2014, and about 800,000 are predicted for 2015, according to Truth told, all across the U.S., business owners and payroll managers are sweating making payroll each month. Many major businesses, including Radio Shack, Wet Seal, and SkyMall, have filed for Chapter 11 bankruptcy this year already.

While the major corporations are the ones that make the news, payroll concerns can be even more worrisome for small businesses and startups. All businesses are required by law to pay employees in a timely manner, yet their customers may wait 30, 60, or even 90 days before paying invoices. This gap between receiving payment for completed work and making payments to employees can leave small businesses cash-poor in the short-term, with the potential to push them over the edge of insolvency.

In today’s challenging economic climate, payroll concerns have become an almost inevitable part of doing business. However, it doesn’t have to be this way. For companies with verifiable invoices for completed work, who are simply waiting for payment, there’s a simple solution to the payroll problem. It’s called invoice factoring.

What is Invoice Factoring?

Invoice Factoring is the sale of a company’s invoices to a factoring company, which pays the invoice immediately, minus a small percentage for its services. The invoice factoring company then takes over collections for the invoice. The business client gets cash fast, which can be used to make payroll. And, the factoring company gets paid when the client pays the bill.

How can Invoice Factoring Solve Payroll Problems?

  • Protect Personal Funds

    When business owners can’t make payroll, they often turn to personal funds, including savings accounts, friends and family, or even retirement accounts. To avoid lawsuits, IRS problems, bankruptcy and worse, most companies will use any means necessary to ensure employees are paid on time. With invoice factoring, you don’t have to resort to drastic measures.

  • Avoid Taking on Additional Debt

    Business loans are another option for business owners. However, loans must be repaid, with interest. Further complicating the matter, many small business owners and entrepreneurs do not have the capital or credit history to qualify for loans. Unlike a loan, invoice factoring involves the sale of invoices. That means no drawn-out approvals, no interest payments, and no additional debt as long as the invoice is paid.

  • Prevent Layoffs

    The last thing any employer in a growing business wants to do is lay off employees — especially when new opportunities are coming into the shop. Instead of letting employees go when you need them most, just to make payroll, invoice factoring enables you to keep all hands on deck, and pay them on time.

  • Reduce Expenses

    In a recent article published on, Donald Todrin, founder of the Northhampton, MA-based Second Wind Consultants, recommends raising cash by requesting a reduced payment from clients, in exchange for wiring the money immediately. He suggests accepting as much as a 50 percent hit on outstanding receivables, in order to cover your payroll. Of course, for savvy businesses that partner with an invoice factoring company, the cost of immediate cash is much, much less. Triumph Business Capital only charges a small percentage of your invoice in exchange for immediate payment.

  • Take Care of Your Employees.

    It’s not just about avoiding lawsuits, federal and state tax liabilities, and IRS penalties. And it’s not even just about keeping your business afloat. Whether you manage payroll for a small business or large company, paying your employees on time is just the right thing to do.

As an employer myself, I take the responsibility of paying my employees in a timely manner very seriously — especially since I know what it’s like when an employer drops the ball. If your business is struggling with making payroll, invoice factoring may be the right solution to help you bridge the gap between collecting payment and writing checks to employees. If you want to learn more, contact my friend, Blaine Waugh, at Triumph Business Capital