Utilize Payroll to Improve Cash Flow
Over the centuries, the essence of entrepreneurial activity has not changed – to get the maximum profit at the lowest possible cost. Unfortunately, in times of crisis, sometimes it is not up to profit. Cost reduction comes to the fore, including labor costs, which occupy a significant share in the costs of entrepreneurs and small business owners.
Now, an analysis of judicial practice shows that employers often carry out optimization blindly, with many errors, despite the good coverage of this issue in the legal business press and online legal systems. In some cases, this is due to the low level of qualifications of the relevant specialists, but most often – due to unwillingness to comply with the requirements of the law. In this article, we present completely honest, and moreover, effective ways to utilize payroll to improve your cash flow. Stay with us.
Optimize Your Business Processes
Optimization of business processes is not only the key to reducing costs, increasing efficiency, and bringing the business to a new level of profitability. This is also one of the basic ways to utilize payroll to improve your cash flow.
By optimizing your marketing, you can make your marketing department more efficient. No, not thanks to a reduction in their salaries due to automation software. This becomes real due to the fact that your employees will be able to stop wasting time on routine tasks, and will be able to focus on real business challenges and work more closely with the sales department, for example.
The same algorithm works for optimizing your production. You have the opportunity to produce more products with lower costs and better quality, and as for the marketing of these products, set this task to your marketers and sales managers, whose work you have also optimized.
Switch to BI-Monthly Approach
In this section, we will talk about the frequency of salary payments. As a rule, most companies use the approach according to which they give out salaries every two weeks.
We suggest that you change your strategy and pay attention to such a period of payments twice a month. Formally, both of these approaches sound the same, but in practice, everything turns out differently.
When you issue a salary twice a week, it turns out that you are not tied to calendar dates, but tied only to the passage of time. But when you follow the bi-monthly approach, and pay for the work of employees, for example, on the 5th and 20th day of each month, you have accuracy and clarity. You know for sure that by these dates you should be ready to pay, and your payroll documents will also become clearer and more structured.
Switching Payroll Providers
It sounds like a daunting task but it’s really not – especially toward the of year. Switching payroll providers at the end of the year are easier since you don’t have to provide paperwork from previous months and can start fresh in the new year! Furthermore, most payroll providers charge companies each time they run payroll – so if you pay employees 2x per month you’re being hit with fees 2x per month! Companies like Fingercheck, on the other hand, charge a single, low monthly fee regardless of your payment schedule. This alone can result in a substantial savings year over year and improve your business cash flow.
Don’t Let Good Employees Go
The business environment is unpredictable, and if today your business is booming, nobody guarantees that tomorrow or in a month this situation will not change. However, what if you have not yet managed to provide your business with a soft landing? The most important thing is not to let your best employees leave you. They are your main driving force, and they are capable of how to take your business to a new level even in high conditions, as well as drown you following the example of the Titanic.
If the situation is critical, you can consider a targeted loan but a better idea to think about when cash flow runs thin is turning to a payroll company such as Fingercheck, who provide clients up to $5K with no underwriting required (in most cases). But if you lose employees, then the cost of finding, hiring and training new ones, building their loyalty from scratch, will be much more significant than the interest on any loan or cash advance.
Get Rid of High-Value Assets
This is partly a question of optimizing business processes, but it is slightly different. You can optimize even by staying the owner or liable for high expense liabilities. For example, even by automating marketing, you will still be forced to pay for office rent. But if your business has the opportunity, for example, to switch to a remote or partially remote form of work, to outsource accounting services or support of IT structures to specialized companies, why don’t you do it?
Give Your Debtors a Convenient Way to Pay You Back
Do you know such a phrase? When you borrow, you borrow strangers’ money for a while, and when you repay, you give your money back, and forever. And it is not surprising that your customers or debtors may not really want to part with the money that you lent to them or which they should pay you for the services they consumed or the products they bought. Their business at the moment may also be in a critical situation.
Therefore, your task is to offer a reasonable alternative that will be comfortable for both parties to the transaction. For example, you can offer a small discount to your regular customers who have not paid for your services or goods, as well as develop an option for an installment payment for your debtors.
The famous philosopher Ralph Emerson once said that money costs us too much. The poetic aphorism of the 19th century in the first quarter of the 21st century is taken literally: in order to earn at least something, we first need to give and invest much more. According to various estimates, working with a salary fund (including budgeting, planning, monitoring payments and evaluating results) can take up to 35% of the HR department’s time. Part of this time can be freed up through optimization, automation and competent work with payroll — provided that a balance is maintained between the costs of implementing automation systems and the expected benefits of such implementation. In addition, feel free to use our advice and all your actions will definitely become more effective.