The first few years of operation of a business are the toughest, so much so that it may be a fight for survival. Once you start expanding, you will need extra hands to handle the increasing work so you can focus on the growth of the enterprise. This is the challenge for most entrepreneurs, literally staying afloat while their expenses grow due to the added headcount of the business.
There are many companies that do not manage their funds well or do not have access to money to keep the organization running before they start earning. Unfortunately, they might not find themselves capable of taking out loans from the bank due to their situation, which makes staying in business even tougher.
If you are an entrepreneur, you might then find yourself facing an important question. Should you take the risk of hiring employees with the chance of really being able to expand, or should you minimize your costs by remaining a one- or two-person organization that is limited in what it can deliver?
Employees Help You Grow the Business
In the beginning, the business was handled by you, and any partner you may have. Because you are still trying to attract clients, you are focused on the production and marketing part.
However, as your customer base expands, you need to produce more and nurture more relationships. Your clients will need someone in the organization to communicate with regarding their orders, and someone has to handle the billing and collection. When money comes in, you need someone to handle the accounting and other paperwork. Without employees to handle specific tasks, you will not be able to create the product and keep the customers happy, while handling the administrative part at the same time.
Trying to run the organization without hardworking employees will make it suffer, because you will either not be able to deliver on time, or you will not be able to provide good customer service. In reality, the only way to really make expansion work is to get extra people who will focus on key parts of the business. Moreover, they will be bringing their expertise in their specific tasks, so that you will be sure that things will run smoothly. For example, hiring a marketer that has ample online marketing experience can really mean the difference between being an obscure company to one that is connecting to customers online.
Employees Also Add to Your Overhead Costs
The challenge is to keep your head above water. When you start expanding and adding to your company, you need bigger office space. You need workspaces and computers, among other things. But the cost of hiring employees does not end there.
When you sign a contract with an employee, you gain the responsibility of paying them for their work. This means a set monthly salary, including benefits mandated by law. If you want to attract great employees that will help you grow your business, you will need to offer an attractive package. Even if you find people who believe in your product and your vision, very few will actually put in 40 hours of work weekly for nothing. In fact, you would need to offer them good reasons to stay and do their best at work.
If your company has just gotten off the ground, you might not have as much money coming in yet. Whatever you are earning may also be going back to the business, either through marketing to find more customers, or by producing more products. There may really be times that you will find it tough to make the payroll. This is where invoice factoring can help with payroll expenses.
Managing Your Funds
Though you would continue to work hard even if making a profit is far away on the horizon, you cannot say the same for your employees. They have bills to pay and families to feed. Still, delaying their pay is a huge mistake. You might end up with unhappy employees who will just bring your business down. Even customers will be encouraged to buy when the people they interact with are passionate about what they do.
You might also encounter a situation when you have made enough sales to cover the expenses, but the money has simply not yet been received from the client. Corporate clients, especially, also have their own internal processes that might mean the payment cannot be processed and released immediately. While you certainly have the right to follow up, being too annoying might also wreak havoc on your relationship with the customer. You might not have any other option but to wait. Of course, as the owner, figuring out how to pay your employees on time is certainly a huge cause of stress and worry.
Payroll Factoring Is There to Help You Out
When you are unsure as to where you can get the funds for salaries, you can turn to invoice factoring for payroll. Simply put, this is using your invoices as collateral to obtain cash for your overhead costs. This way, you will not have to badger your clients to pay you instantly and you will not have to tell your employees that their salaries will be delayed.
For a small fee, you will gain access to funding that will cover your needs until your invoice is paid in full. Of course, much like any other types of loans, this is subject to processing and approval depends on your relationship with the client and any previous transactions. In the event that the payment takes a little bit more time, it is better to pay factoring fees than interest on a loan that is accumulating over time.
While payroll is one of your most urgent costs, factoring might also be used to pay for other overhead expenses and bills. By gaining access to funds, your organization can continue operating as normal, and work hard to make the business pick up.
Over time, you will see this paying off, and instead of needing an inflow of cash to keep surviving, you will start to have extra cash on your account. Soon after, you will start to see your company actually making money! One day, when your once-struggling business grows to be a multimillion enterprise, you will be grateful for payroll factoring, for keeping you afloat instead of folding early on in the game.