By Kimberly Howard AdviceIQ.
An expanding business makes many demands on your finances. One of them is the cost of hiring additional staff. Instead of taking on full-time workers at the early stage of the business, using contract employees to fill a staffing gap is a better way to go.
A growing company means a lot of changes in the structure and workforce composition. Keeping proper track of where the money goes becomes harder as the company expands from being a single-person or small operation to a larger enterprise with many employees.
A particular challenge in controlling finances is the cost of new hires. If your business takes on new clients, you may require additional staff to look after those clients, or to handle accounts in and out as the revenue and expenditures grow.
But at the same time, you need to ensure that the expenses of new hires don't hurt the company's finances.
Hiring full-time staff entails red tape and leaves you with less freedom of maneuver. When you throw in benefits and Social Security/Medicare taxes, it is more expensive than temps. That's why taking on temporary staff on contracts may make more sense.
You might feel pretty confident that the business is on solid ground after landing a big new client, but a temporary contraction at some point in the future is possible. When that happens, having the flexibility to adjust employee numbers easily is enormously beneficial.
On the flip side, what if your business suddenly expands, and you need staff immediately to handle the increase? You can bring in qualified and experienced people quickly through temp agencies, which already take care of the vetting.
Another significant advantage of using contract staff is the reduction of administrative burden on your part. Your company pays a temp agency directly, and it is responsible to handle the pay and the associated costs of a contract worker.
Outsourcing certain time-consuming tasks is another technique. As an entrepreneur, you want to focus on keeping clients happy and keeping revenue flowing. If you have a small business, you probably keep track of the payroll and expenses by yourself.
But as it grows, you need a more complex system for recording those expenses and ensuring that every dollar is accounted for. Keeping tabs on all employees' expenses requires a lot more time and effort.
Having a payroll solution, meaning payroll is handled externally, gives you the freedom to focus on growing your business.
This also gives you the peace of mind of knowing that you are fully compliant with all regulations relating to employee pay and taxes.
___________________________________________________ Kimberly J. Howard, CFP, CRPC, ADPA, is a Certified Financial Planner and the owner of KJH Financial Services, a Fee-Only practice in Newton, Mass., and Denver