The last thing you want as a contractor is to lose employees because you’re unable to pay them in a timely manner. Having them leave means you are short a man and your competitor will be benefiting from your guy.
The best way to keep from losing employees is to take measures to make sure they don’t leave in the first place. Making sure they’re paid on time is of paramount importance. Listed below are three steps you can take to infuse some cash into your business so you can pay your employees on time and ensure no one leaves because you’re not able to pay them.
Cut Expenses
If struggling to meet payroll is a recurring problem, you need to look at ways to cut expenses where you can.
Consider reducing your team by combining job roles or simply eliminating a few underperforming individuals.
Take a long, hard look at your business to see other areas that may be costing you more than necessary. When was the last time you did an assessment of your operations or other internal software subscriptions? Chances are you are paying for ones that you rarely if ever use. Re-evaluate your office space to see if you could reduce the amount of space you need, potentially lowering that expense. Are you paying for services like cleaning or landscaping? Talk to them about lowering their frequency or even change companies to ones with better rates.
Equipment Sale and Leaseback
Another possible fix to free up some working capital can be found in your equipment… if you currently own it. Using a sale-leaseback, you sell your equipment to an equipment leasing company with the stipulation they lease it back to you, typically at a lower monthly payment than you were previously paying.
This can also free up some monthly cash flow, and while there are pros and cons to owning or leasing equipment, this solution may make sense for your particular situation.
Of course, if you have equipment that you rarely use do you really need it? Sell it.
Take Advantage of Invoice Factoring
By far, invoice factoring is the best solution for any construction business struggling with cash flow problems especially when they issues are seasonal or temporary. Factoring allows you to benefit from an influx of immediate working capital. It doesn’t matter how big or small your company is or if you have a spotless credit history.
One of the reasons construction companies, in particular, suffer from cash flow problems is because of the 30 – 90 days they often have to wait to get paid after a project is completed.
Invoice factoring eliminates the waiting period by providing immediate funds you can use to meet payroll, pay taxes and vendors, and take on new and bigger jobs. This helps your business grow and expand, and you’re able to do that without incurring any debt.
How Factoring Works:
- CapitalPlus underwrites your firm and your clients.
- You invoice your client and send a copy of the invoice to a factoring company, like CapitalPlus.
- CapitalPlus sends you 70-80% of the invoice value in cash funds you can immediately use. You’ll typically receive your funding within a matter of hours.
- When your client pays the invoice to CapitalPlus, you’re paid the balance of the invoice less a modest fee that’s taken out.
Banks typically see construction as a space too risky for their taste. Even if they have an appetite, before approving a loan, the bank will look at your company to determine if it’s financially sound. The size, age, and creditworthiness of your business will be scrutinized. And if your loan is finally approved, it can take a month or more and you’ll have to pay it back, with interest.
Factoring eliminates all that, including the waiting and the payback, and makes the decision primarily based on your client’s credit history. Factoring companies are more concerned about the creditworthiness of your client, rather than the size of your company, or your credit history.
NEXT STEPS: How to Choose the Best Factoring Company for Your Business
Get Control or Lose Them
We all know how hard it is to build a good team — you can’t afford to lose an employee because you can’t pay them on time. Invoice factoring ensures you’ll always have enough cash flow for payroll and other expenses. If you’re struggling with cash flow, even if it occurs more than once, and you have a customer base of creditworthy clients, your business can benefit from invoice factoring. Give us a call at 865-670-2345 or schedule one to get started today!
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