When Can I Afford To Take On More Employees?
Are you ready to take on a new employee? Whether it’s your first hire or your 28th, you’ll want to make sure you have enough cash in the business to cover the expense of an extra pair of hands on board.
How will you know when the right time to take on a new employee is? It’s likely you have identified a business need for a new body in the office (or on the Zoom call) and adding the right person to your team can help you boost your business’s revenue.
However, taking on a new member of staff carries a degree of financial risk. And while the current economic climate is unpredictable, you’ll want to ensure that your business finances are stable enough to take someone new on board.
Should you hire more staff?
Timing is critical when making a decision like hiring a new employee. Having a good grasp of your current and future cash position is essential in helping you decide the right time to go live with that job ad. That’s where a detailed cash flow forecast comes in. At a glance you’ll understand how your business cash flow is looking and whether you’ll have some surplus cash to reinvest in your business in the form of a new employee.
If your business already has the bases covered – you can meet all your costs, you can pay yourself, there aren’t any perilous cash gaps ahead and your company is at the very least breaking even – chances are, you’re probably in a good place to make a new hire.
Remember that as well as covering a weekly or monthly salary, you’ll also need to take into account any national insurance or social security contributions you might need to make, as well as their pension and any equipment they’ll require. So these are all things to factor into your costs.
Plan out your hire
It’s a good idea to use a scenario planning tool to build in the expense of a new hire into your existing cash flow forecast. With Float’s scenario planning feature you can use your existing cash flow forecast as a base, and without editing the ‘real’ forecast, take a look at how hiring a new employee might impact the figures.
While a new member of staff comes with added costs and no guarantee of an immediate impact on revenue, on the bright side it sounds like your business is growing – and in our eyes that’s a total win!
Want to try out scenario planning to see if you can hire more employees? Take a free trial of Float today.