Most people get introduced to the payroll funding business when they need funds to start or grow a staffing business.
On its surface, the service is simple – as an owner you take care of your clients, you take care of your employees, and you let a full-service payroll funding provider do all the dreary work of processing payroll, forwarding funds to meet that payroll and all the rest that goes with invoicing and collections.
As you dig deeper, the math that goes along with that stops being so simple and those in the payroll funding business like TempWorks end up with a variety of formulas to help reduce the complexity. Here is some of the language and their related forumals plucked straight out of our funding software code:
- Some definitions
- InvoiceAmount (IA) – the original amount due from the account debtor
- Financedamount (FA) – the amount the factor has paid towards the purchase of an invoice
- Clientpayamount (CP) – the amount paid (in cash or adjustments) by the account debtor to the factoring client
- Factorpayamount (FP) – the amount paid (in cash or adjustments) by the account debtor to the factor or (3rd party factor, see “fmPayeeId”)
- FactorFee (FF) – amount charged in fees
- DueFactor (DF) – the remaining amount due to the factor, also called FundsEmployed
- DueClient (DC) – the remaining amount due to the client when the invoice is paid in full
- ReserveReleased (RR) – the amount paid to the client by the factor
- Some formulas:
- notice that DueFactor+DueClient=RR+FF-FP+IA-FF-RR-CP which simplifies to IA-FP-CP which says that the total remaining to be disbursed to either the factor or the client is the amount of the invoice less any payments (in cash or adjustments) made to the factor or client