Where do you envision your business in a year? Perhaps you are targeting a 25% increase in revenue, which you plan to meet by growing your contractors to expand your projects and capabilities.
Recent years have created an uncertain landscape for growth. Half of businesses started in 2019 had shut down by June 2023, marking the worst closure rate since the 2008 global financial crisis. To avoid becoming a company that closes its doors – in 2024 or beyond – you need a solution to support you through the challenges.
These challenges do not only refer to those experienced within your business. Even if you perform well, cash flow issues within your client base can negatively impact your company’s earnings. The unpredictability of invoice payments, or unpaid invoices, also disrupts your cash flow, hindering your ability to pay current staff and hire more people.
Payroll funding gives your business the funds to meet obligations while waiting for clients to pay their invoices. It is borrowing against unpaid client invoices - invoices to clients for contractors - to meet payroll obligations to those contractors immediately.
Focus on increasing your contractors
Your number of contractors must increase before your number of projects can. Payroll funding enables you to hire more people before clients pay your invoice. Instead of hiring one or two contractors at a time, restricted by the limitations of waiting on invoice payments, you can hire people as needed. This strategy enables you to take on larger opportunities and increase profitability.
Payroll funding also guarantees consistency in payroll operations, which supports morale and retention. Rather than uncertainty over whether you can pay contractors on time, your company offers stable and secure work. This stability helps you retain current contractors and attract more, which drives the business' success.
Expand the number of projects worked on
As you increase the number of contractors, your business can take on more projects and explore new opportunities in the market. More contractors means your business can accept work from bigger clients you did not previously have the resources to support. In addition to increasing your number of projects, you might also plan to expand your offerings, such as providing staffing services in a new industry or deciding to offer more services to existing clients.
Payroll funding allows your business to increase the size of your team, which, in turn, enables you to handle more projects. It alleviates cash flow constraints because you can invoice these projects and complete payroll at a weekly or fortnightly cadence, even if your client does not pay until the end of the month. This scalability allows your business to pursue new opportunities and strategies, focusing on expansion and delivering more value to existing clients.
Stop cash flow issues from hindering growth
46% of all businesses in Australia experienced increases in their operating expenses over FY2022 (pictured below). Rising operating costs make it particularly difficult for contract-based businesses to balance payroll with other overhead costs.
When your business maintains a steady cash flow, you can invest in payroll, equipment, and operating expenses without delays. For contract-based companies, paying these expenses relies on client invoice payments, and growth becomes harder as the business lives paycheck to paycheck. When you have a steady cash flow and do not need to dig into reserves, it becomes much easier to invest in contractors and grow the business.
Source: ABS.
Minimise unproductive debt
Unproductive debt refers to money that your business owes but does not generate a return on investment. For example, some businesses use credit cards to cover cash flow gaps, but these come with high interest rates that the business pays without gaining improved operations or outcomes. Unproductive debt limits growth because the business has to divert funds to repay debt rather than invest it in the business.
Payroll funding offers a more sustainable alternative by helping your business void such debt and free resources for growth. Moreover, it does not show as a debt on your balance sheet and will not impact your chances of securing a loan when needed.
Invest in business growth
Payroll funding supports sustained growth as your payroll needs increase. It offers a fast turnaround, with funds available within 24 hours. As your business invoices more clients, you can increase payroll funding accordingly to meet the needs of your growing headcount. This scalability ensures financial resources are not a barrier to expansion.
Manual payroll processes also become difficult to scale when the company grows. As your headcount increases, so does the number of people needed in your back office. The organisation’s leadership might manage this task, which takes their attention from building growth strategies. Payroll funding paired with Payroll Management automates back-office tasks, such as timesheets and legislation compliance, to scale with the business and help you focus on what matters.
Conclusion
Payroll funding can support your 2024 business growth plans by providing the financial flexibility to expand the workforce and take on additional projects without cash flow constraints. Consistent payroll supports contractor morale and helps you avoid traditional cash flow solutions that result in unproductive debt.
It also offers a sustainable solution for managing growth-related financial demands, allowing your business to confidently pursue expansion and new ventures. No matter your plans next year, payroll funding is a key tool for long-term business success, providing the necessary support to navigate growth challenges.Why choose Payroll Funding from APositive?We have the experience to help your business grow through cash flow challenges. Our Payroll Funding solution unlocks money stuck in unpaid invoices so you can pay staff on time without waiting on your clients.
Our specialists can also deliver an integrated back-office solution to remove the administrative burdens of managing payroll yourself.
