Payroll is one of the most important and primary expenses in a business. At the same time, a healthy workforce is a key to success. When payroll and workforce come together, your cash flow is impacted. So the big question is, how can we keep a healthy cash flow while also managing the workflow in the most optimum way possible. In short, regular workforce reviews will keep your startup well-positioned when times get tumultuous.
Below are the top ways you can bolster your cash flow via workforce management.
Reduce contract staff
It's easier to make changes with outside contractors. With changes we mean cancellation, postponing, or reassigning. Eliminating contract staff is a quick way to strengthen cash flow when times get tough. Ensuring that you can re-engage with the same contractors in the future, could be challenging though. If you can find a middle ground, that's perfect, else, minimizing contractors is a quick fix to get results.
If things look tough, defer or postpone any bonuses or incentives. Make sure that you honestly communicate this to your workforce. This won't have any impact on your current business operations and interactions with customers. At the same time saving on some cash set aside for incentives can help you cover other business expenses.
Cut back on executive compensation
This can make a huge difference. This way you might not even have to remove employees. Executive compensation captures a massive chunk in the cash outflows. Such unselfish steps from the management can help enhance employee confidence and trust in the organization. At the same time, the executives can be compensated in kind and other perks for some time.
Furloughs over termination
These two words are often used interchangeably when they have different meanings. Furloughs are unpaid leave to employees. If your state allows furloughed workers to seek unemployment benefits, then it's even better for you. Otherwise, see if you can provide them with some other benefits for the time being. All said this method can be short-term only. One important thing though, is if you have gotten a loan under the PPP program, then furloughing workers won't allow you to obtain PPP forgiveness.
Shorten hours of operation
If your business is a mom-and-pop, then reducing hours of operation can be a good way of reducing expenses and enhancing cash flow. This is a tactic that a lot of restaurants are also following. One good outcome of this approach is that your existing customer base gets a lot more cognizant of those hours. This can also help you get heavier footfall as reduced hours may convey exclusivity of product and service. At the same time, you need to pay salary to your workers for lesser hours. This won't impact any of your supplier or customer relationships.
Remember that every business is unique. With that, the steps taken will vary for each small business. If you are spending a lot of time managing your workforce, then consider Greyleaf. Greyleaf provides you with customized tips for your company.
Learn more about how Greyleaf can simplify your financial analysis.