Payroll Services & Back Office Support with Payroll Funding
Steve Capper – Flexible Funding - July 17, 2017
When shopping for payroll funding with back office services and payroll processing, you may find that some funding companies do the back office/payroll processing in house (single source). Other funding companies partner with or outsource to reputable companies that specialize in payroll processing services, back office and software for the staffing industry. In
competition for a new customer, a single-source funding/back office company salesperson may occasionally disparage outsourcing the back office payroll services component simply because there are two points of contact. Actually, there are advantages when a funding company partners or out-sources back office.
Key advantages of a back-office support partnership over other funding company “single-source” funding/back office programs include:
In a funding company with in-house back office operations (single-source), if you ever have a problem with the back office services, you could complain and be responded to slowly or inadequately. There may be no urgent incentive to respond or short-term repercussions when they have a customer locked in a long-term contract. Hopefully they will respond quickly and adequately to uphold an existing excellent reputation.
If you have an issue or service problem with a funding company’s outsourced payroll services back office partners, the back office partner would try to respond well because they need to do right by you and their funding associate. A funding company may have a lot of their customers working with the back office operation and may bring them a good deal of new business, therefore they can have leverage; they are there as a strong third party advocate for you.
TRANSITION, CONVERSION, EXIT STRATEGY
If you should ever decide to sever your back office service and bring the functions in house, or move to another back office service provider, most single-source funders/back office providers won’t let you move your back office in house unless it coincides with the end of their current-term contract commitment. That may not strategically coincide with the timing that is right for your company and its business conditions. Conversion of the payroll data from one software system into another can be extremely difficult and cumbersome at certain times of the year. Generally, the later in the year a conversion takes place, the more difficult it is. There is simply more payroll data to convert accurately.
Some funding companies won’t let you move back office to your own firm at all. For the above reasons it may be better for some to work with outsourced back office. There can be more opportunities to make changes when it works out best for you.
SEPARATION OF POWERS / BUSINESS SECURITY
Having both funding and back office at a single source may offer too much control over your business to one company. If you have a dispute with one organization that completely controls both cash and back office, it is easier for them to not play straight with figures. In a dispute with a hardball player, not applying certain customer payments to your accounts receivable aging, loan, reserves, or weekly profit calculation reduces the cash available and reduces your ability to pay accounting and/or legal professionals to uncover the discrepancy or contest the dispute.
With a payroll funding company that out-sources payroll services and back office services to business partners, you have the safety of separation of powers–two accountable parties and some cross reference on your data.
SOFTWARE OWNERSHIP AND DEVELOPMENT
Many of the single-source funding/back office companies did not develop or do not own or control their back office software.
When the back office organization owns and controls its software, it provides greater ability to handle special billing scenarios and reporting needs. A back office service provider can generally be more responsive to your needs if they control the development of their own software.