Anyone who runs their own business knows that it can sometimes be tough to make the numbers tally. Keeping control of your costs and implementing good financial management is key for this reason. Eight out of ten businesses fail within the first 18 months, and most of that is down to running out of money.
One area in which you will spend a lot of money is staffing. By the time you have trained someone up and given them office space and equipment to use, the costs involved with permanent employees can soon add up. This is where using contractors can really help.
How can contractors help your business finances?
If you are looking for reasons that show how independent contractors can assist, the below are some of the best:
- Bring in more work – while contractors are great for slashing costs, they are just as good at bringing more money into your business. There may be a lucrative contract that comes up that your in-house staff do not have the time or skills to complete. Rather than miss out on this extra revenue, you could hire a contractor with the skillset and time to do it for you.
- Only pay when they work – all businesses feel the pain of employing permanent staff who still get paid even when you have quiet weeks or months. By hiring contractors, this is completely avoided as they only get paid when you hire them to complete outstanding work.
- No redundancy or payoffs when leaving – another great financial bonus with using contractors is that they simply stop working for you when their contract ends, or the project is complete. They are not locked into a permanent contract as salaried staff are, which means that no redundancy payment or settlement is required.
- Reduced costs compared to permanent staff – when you hire someone on a permanent basis, there are lots of costs to bear as an employer. From legal ones around any errors they make to insurance, it can add up. Contractors are self-employed, so you do not have to take on these types of costs with them. When you add in the fact that they will probably use their own equipment, it is easy to see where your business finances can benefit here.
Using an umbrella company makes sense
An umbrella company is a third party between you and the contractor. The umbrella company legally acts as the contractor’s official employer and therefore deals with their payroll on a PAYE basis. When you think of the time spent in collating timesheets and dealing with queries, this makes sense. It is worth either only using contractors who work through this kind of company already or using one yourself for running contractor payroll.
Looking after your business finances is key
If you want to help your business survive and grow into the future, you must look after its finances. This will not only preserve the cashflow you need to operate but also provide emergency funds for any slow periods. Using a contractor can help greatly here and really bring down the amount of money you pay out in staffing costs.