Payroll funding and invoice corrections go hand in hand in staffing, but few outside the industry appreciate why.Â
In my last post on the mathematics of payroll funding an asset-based funding industry professional questioned my use of the term â€˜FinancedAmountâ€™, saying that the term makes no sense and is not part of the standard factoring lexicon.Â
It makes no more sense â€“ his reasoning goes - to talk about buying part of an invoice than it does to talk about mortgaging part of a house.Â Â You donâ€™t offer up part of your deed to get the mortgage.Â Itâ€™s an all or nothing deal.Â The same goes for invoice factoring.
And heâ€™s right for his world, but not for that of full-service payroll funding.Â Â As with most things in staffing, what looks like a simple process from the outside gets very complicated on the inside.Â It might seem that a temp agency waves a wand and gets 25 call center operators out to a job overnight, but itâ€™s a lot more complicated to say the least.
The same goes for a staffing invoice.Â Itâ€™s extremely common in staffing to revise an invoice.Â So much so that most mature staffing software makes invoice correction a quick process with minimal hand entry.Â In fact, in Tempworks Enterprise our engineers have turned it into a process almost as simple as updating a Word document.
Take for example an invoice that originally went out with an invoice amount of $10k and subsequently has a credit memo issued against it for $2k.Â This is what creates the need for the notion of a â€˜FinancedAmountâ€™.Â We can think of it as two separate invoices:
Invoice #1.Â Invoice amount $10k.Â Original finance amount $10k.
Invoice #2.Â Invoice amount -$2k.Â Original finance amount -$2k.
Staffing software internally combines the two invoices together for presentation to the client, and in a similar manner the funding software combines the financedamount as well.
Thus an accountant could look at invoice #1 and see that the balance due is $8k and that the financed amount is $8k as well.
One reason I write all this is to point out an important advantage of full-service payroll funding over generic asset based lending.Â First, you get an integrated system that makes it easy to deal with invoice corrections.Â Secondly, you can easily track the funding status of a corrected invoice.