Why PEO’s Should Not Fund Clients When They Miss Payroll
You’re a PEO (Professional Employer Organization) and one of your clients calls you and says, “I don’t have enough cash to make payroll” but your PEO company has a culture of customer service and you also know how hard it is to land new clients, so you agree to fund this client. For one payroll, you hope!
At Payroll Financing Solutions, we hear it all of the time. PEO’s who covered payroll for a client and later learn that they would never do thatagain. There are three key reasons why PEO’s should never fund their own clients and what the PEO can suggest to their clients to solve everyone’s problems.
The PEO business is a volume business and margins are tight. If you fund your client and they don’t pay you back for a while or at all, it really affects your bottom line. It also greatly affects your relationship with that client. It is almost like borrowing money from a family member, you hope you get the money back but talking about it can ruin your relationship.
The money you funded to your client really takes up a lot of your time and energy. It is very draining to you and your staff knowing that someone owes you money and that not only will you be on the hook for taxes but now, you are also on the hook for the fund you just gave your client. In addition, if the client misses payroll this time, what happens if he calls you next time and says he will miss payroll again?
Companies that miss payroll have the highest risk in the financial industry and is that risk you are taking worth it. Are you being compensated for taking that risk? Financial companies that are in the business of making funds know that there will be a percentage of companies that fail to pay and because of that they can spread out the risk. A company that is going to miss payroll is the most risky funds any financial company can undertake and that means you need to get compensated at a very high amount because you cannot spread out your risk. Are you going to look good charging a high interest rate to compensate you for the risks you are taking?
The solution is very simple. You can help your client make their payroll, you will not lose a client that you worked so hard to get, and you will not be drained with the emotional energy about a client paying you back. Payroll Financing Solutions works directly with PEO’s when you have a client that is going to miss payroll. We can fund many clients and make the PEO look like the good guy for solving a problem. Plus we even pay the PEO for the referral.
Payroll Financing Solutions (www.payrollfinancingsolutions.com) was one of the first companies to provide short term, unsecured, fast funds for working capital to viable companies, allowing one to have a funding resource better then a bank or factor so there is no missed payroll in times of increased sales or unexpected expenses.