As your business growth opportunities rise, managing vendor payments can often become a time-consuming and complicated task. This puts unnecessary strain on you, your business, and on supplier relationships, but it’s easier to fix than you might think.
On this page, we’ll explore what can go wrong in the vendor payment process, plus explore some best practices in vendor management that you can start applying right away to make life easier for everyone.
Common Vendor Payment Issues
When vendor payment management is lacking, you’ll start to notice some or all the signs below.
Late Payments
Nearly three-quarters of procurement professionals say late payments strain business relationships per PYMNTS surveys. Yet, more than 40 percent of businesses report having a late payment fee in the past year, other PYMNTS surveys show. This is one of the more obvious signs your vendor payment management strategy is lacking, but it’s often dismissed as a one-time oversight and goes unaddressed.
A Lack of Visibility into Supplier Spending
It’s often difficult to keep track of expenses in today’s subscription-based society. At home, you might sign up for three different streaming services, then forget you have them. The same thing happens at work, but it’s amplified. It’s not just you setting up auto-charges. It’s multiple people across multiple cards. Sometimes businesses pay for multiple subscriptions to the same service or place the same order twice just because there’s no visibility or bird’s-eye view of what’s happening.
Manual Invoice Approval Processes
Many businesses don’t see manual approval processes as being a vendor payment issue. However, it’s one of the top reasons businesses report late vendor payments, according to PYMNTS. Between the lack of efficiency and entry errors, manual approval processes can cause many vendor-related issues.
Security Issues
It can take a considerable amount of time to recover after a security breach, and you may not be able to pay suppliers in the interim. You may have security issues if you’re:
Mailing payments
Making payments through unencrypted portals
Failing to take steps to protect cards and account numbers
9 Tips to Improve Your Vendor Payment Process
When you manage vendor payments effectively, you’ll keep more money in your business, have better cash flow, and have better relationships with your suppliers. Apply these nine tips and start improving your vendor payment strategy right away.
1. Automate Your Invoice Processes with Vendor Payment Software
Accounts payable (AP) automation addresses some of the most common vendor payment issues. It helps ensure you don’t lose track of payables, boosts efficiency, and can help you save money in the long run.
2. Track All Your Due Payments
You should have a good idea of what’s coming due even before you receive an invoice. Good accounting software will allow you to add purchase orders to the system and help you predict what needs to be paid and when it needs to be paid.
With that said, sometimes vendors incentivize early payments. Try to get payments out within the specified window to not only delight your vendors with rapid payments but also to keep more money in your pocket.
4. Centralize Your Invoice Payments with a Vendor Payment System
Sometimes AP software is fairly basic and only allows you to track what’s due and what’s been paid based on invoices you’ve received. That’s not nearly enough if you have multiple team members with credit cards or different departments paying their own bills with no general oversight. That’s how companies wind up hemorrhaging money by having duplicate subscriptions and subscriptions to tools nobody uses anymore. Ensure there’s enough transparency so that you can see what each credit card transaction is.
5. Set and Implement a Clear Vendor Management Policy
A strong vendor management policy helps your business minimize risk, ensure continuity, and maintain better relationships with your suppliers. As a start, your vendor management policy should include:
How your business sources vendors
Policies for contract negotiations
How vendors are onboarded
Policies for setting service-level agreements (SLAs) and penalties for failure to meet them
Vendor risk management procedures
Payment policies
6. Ensure Invoice Accuracy
American businesses lose an average of $300,000 per year due to fraudulent invoices, according to Medius research. Moreover, around a quarter of finance professionals can’t estimate the cost of invoice fraud to their business. Each invoice you have should be matched up to a purchase order prior to payment. That way, you catch any legitimate fraud and don’t wind up paying for genuine errors or unintentional duplicate bills either.
7. Accept Accountability Where Necessary
If you’re not making timely payments or are having other vendor payment issues, it’s important to own up to your mistakes and let the vendor know you’re taking steps to correct the problems. You don’t necessarily need to tell them what happened or why—sharing too much financial info increases your risk—but at least letting them know you take the matter seriously can help maintain the relationship despite issues.
8. Conduct Regular Audits
Audits are typically performed on an annual basis by a third party who looks at your:
Balance Sheet
Purchase Orders
Check Register
Supplier Invoices
General Ledger
The goal is to confirm the completeness, accuracy, and validity of your records. If you’re not ready to bring in an external auditor just yet, perform your own and ensure everything matches up.
9. Make Sure You Always Have Capital for Vendor Payments
Sometimes, businesses make cash flow mistakes or simply experience a period of rapid growth that leaves them short on cash. Your vendor payments should still be prioritized. Explore options to increase working capital.
Get Ahead of Cash Flow Issues with Invoice Factoring
If you’re unable to make vendor payments on time due to cash flow issues, invoice factoring from Charter Capital can help. We accelerate payment on B2B invoices on an as-needed basis, so your business can maintain strong vendor relationships, avoid late fees, and operate at its best. To learn more or get started, request a complimentary factoring quote.
Want to expand your business but not sure the timing is right? With the majority of small business owners feeling confident about the future, per Small Business Majority surveys, now may be the best time to grow. Below, we’ll explore some signs it’s time to expand your business and cover some tips to help you get started.
How Do You Know When to Expand Your Business?
Look for some of these signs that you’re primed for success before expanding a small business.
1. Demand Exceeds Supply
One of the biggest signs a business is ready for growth is that customer demand is exceeding supply. It’s easy to tell if this is happening when you’re selling raw goods because your stock sells out before you can replenish it or as soon as you restock. If you run a service-oriented business, however, you may be overbooked, have long waits for bookings, or have a lengthy waitlist instead.
It’s worth noting that you may see these types of shifts when you’re scaling during peak season as well, so it’s essential to review your records to ensure you’re not experiencing a cyclical shift before committing to expansion.
2. You Have a Strong Team
A diverse team with well-trained and engaged employees is crucial to growing your business. Teams that work well together are better at solving problems, more innovative, and more productive, per Atlassian. They’re also happier and less prone to burnout – all things that can help ensure your growth initiatives are successful.
3. Space is Becoming Limited
Whether you have a line out the door, limited customer space inside your business, or are running out of space to keep adequate inventory on hand, it’s a good sign that you’re ready to add a location or move to a larger location.
4. Your Company is Meeting its Goals
If you’re meeting your goals and your metrics are solid, it usually means that you have the right systems, processes, and resources in place to run a healthy business. You can duplicate these successful practices as you expand your business.
5. Your Industry is Expanding
Sometimes industries stagnate or start to fade away like in-person video rentals did as streaming services became popular. Industry declines like this are a warning sign to hold off on expansion.
Other times, an industry starts generating more interest or booming. This was seen in the short-term with sanitizing products at the start of the pandemic. Other, more long-term industry growth has been seen in niches like green cleaning products, artificial intelligence, and mental health care. Determine if your industry and niche are growing in a similar way. If they are, it’s a good time to explore whether you can expand your business.
6. Customers Are Reaching Out to You
Sometimes, customers are vocal and will literally tell you that they want more products, services, or locations. You can also solicit this type of feedback through surveys. However, you’re more likely to “hear” these types of requests through customer actions instead. For example, customers may say they’re traveling to visit your business, you may receive calls outside your service area, or you may realize you’re shipping products to a larger area. Analyze your customer data or CRM to gain insights and improve customer service.
7. You Have a Solid Business Growth Plan
There are many different ways to grow your business beyond opening a new location. If you’ve explored the various marketing strategies and have a written plan, you’re off to a good start. However, sharing your plan with at least one trusted confidant is also advantageous. Choose someone who understands your business and is comfortable raising questions or concerns. It’s better if they poke holes in your plan or make you think critically about it now than to discover you may have overlooked something after launching an initiative.
8. You Have Enough Capital to Expand Your Business
Around 90 percent of startups fail, per the Startup Genome Report. Premature scaling is often to blame, with funding-related issues among the top five causes. Similar issues are seen with established businesses too. For example, 82 percent of business failures are traced to poor cash flow management per NFIB research. In this sense, it’s not a lack of capital, but often spending and budgeting issues, or even poor collections processes, that ultimately damage the business.
If your business financials are strong and you have enough working capital to invest in growth initiatives, you’re in a good position to expand your business.
Ways to Expand Your Business: Where to Start
If you’re seeing one or more of the telltale signs, it’s time to grow your business, the next phase is planning the actual expansion.
Create a Detailed Expansion Plan
If you don’t already have a business growth plan, as covered in point seven above, start there. Work out a full budget with anticipated expenses.
Adjust Your Marketing Strategy
Your new marketing strategy may be identical to the one you already have, but make sure you’re looking at any changes to the target customers/ personas and any competitive advantages possessed by your business. Also, make note of how the sales team will handle new leads or changes to the sales flow.
Look into Legal Requirements
Depending on your expansion strategy, you may need to change your business’s legal structure. For example, instead of operating as a sole proprietorship or partnership, it might make more sense to form an LLC or corporation. You’ll also need to ensure you have the right licenses and permits and that you’re registered with the appropriate agencies in any jurisdictions in which you plan to operate. A business attorney and/or tax specialist can help ensure you’re covering all the bases to minimize your liabilities.
Ensure You Can Finance the Expansion Comfortably
Working capital issues and funding shortfalls will not only derail your expansion plans but can put your entire business in jeopardy. Even if you think you’ll have adequate working capital to launch your growth initiatives, research what avenues will be available if you have an unexpected working capital shortfall later.
For example, invoice factoring can accelerate payments on your B2B invoices. You don’t need to factor all your invoices or factor with every client. However, if you build a relationship with an invoice factoring company before you need funding, you’ll get faster funding and possibly even same-day payments if you need them later.
Expand Your Business with Help from Charter Capital
As a leading invoice factoring company, Charter Capital makes it easy to secure working capital when you need it most. There are no sign-up costs and no long-term contracts, plus most businesses will qualify. You can use your factoring cash to fund growth initiatives right away or simply sign up and be prepared in case your business needs a quick cash injection later while it’s growing. To learn more, contact us today or request a free quote.
Expanding a business under the right conditions and with the ideal strategy can be incredibly rewarding. But how can you tell if the time is right or which method of growth is best? Below, we’ll go over some signs it’s time to consider expanding your business and cover tips that can help you do it quickly.
When to Expand a Business
Before we start breaking down ways to expand your business, consider if the timing is right. It’s not a good idea to move forward just because you’re impatient over stagnation or because you feel ready. Instead, you should be seeing one or more of the signs below.
You’ve Got “Regulars”
Roughly 65 percent of business comes from existing customers on average, according to SmallBizGenius. If you have a strong customer base, it indicates there’s an ongoing demand for what you’re offering. Use a CRM to track customer behavior and monitor KPIs.
You’re Dominating Locally
Just one in five businesses with below-average growth rates in their local market manages to outgrow their peers, per McKinsey. Your business should be performing well in your region before you try to expand outward.
If you are doing well locally, look for other signs that there’s demand for your business elsewhere, such as orders being placed from far away or customers reporting they’re traveling to see you.
Your Business Has Been Profitable for Several Years
Lots of things can impact profitability in the short run. For example, you might see a spike during certain seasons or if a competitor shuts down. However, ongoing sustained profit shows you’re likely nailing business operations and providing excellent customer service. You should be able to replicate the success of your growth initiatives.
You Have Strong Cash Flow
Cash flow can be a double-edged sword. On one hand, you need strong cash flow to cover your expenses invest in growth, and expand your business. On the other hand, reduced cash flow can often be a sign that your business is already growing, especially if you invoice customers and it takes months after delivery before you see a check for your goods or services.
If you think you have sufficient cash flow for growth, run an analysis to confirm the level has been stable for some time. You can still expand if cash flow is tight, but you’ll want a backup source of funding ready to ensure your business can survive the growth.
You Have Infrastructure and Resources
A strong and reliable team, vendors who are prepared to ramp up, equipment, and other resources should all be in place, or at least accessible before you activate any business growth strategies.
Your Industry or Market Is Growing
Consumer trends shift over time. If your industry or market is stagnant or even shrinking, it’s probably not going to be a good time to grow unless you’re expanding with a related product or service that’s gaining demand. Equally, if your industry or market is growing, it may be a good opportunity to capture a larger share.
7 Tips On How to Expand Your Business
Now that we’ve covered if the timing is right, let’s explore how to expand your business.
1. Improve Your Customer Experience
If you’re running an average professional services business, you’ll lose around 27 percent of your customers each year, according to CustomerGauge. Those in manufacturing lose around 35 percent, while logistics companies lose 40 percent, and wholesale businesses lose 56 percent. These churn rates represent how many potential customers the business will need to bring in just to hold steady. New customers are generally needed on top of the existing counts to see growth.
At the same time, it can cost five times more to attract a potential customer than to retain one, and just a five percent boost in retention can increase profit from 25 to 95 percent per OutboundEngine research.
What this means is that it’s imperative to keep your current customers happy, and you can do that by improving your customer experience.
Track data internally to identify trends in what your customers view, open, and respond to. Use this to deliver more of what they want.
Developing a relationship and creating customer loyalty requires regular contact with your customers.
Gather customer feedback through live chat tools and surveys to find out if customers are getting stuck anywhere and ways you can improve the experience to create a better customer journey.
Go through your own customer flows and experience what they do firsthand.
2. Create a Customer Loyalty Program
A customer loyalty program can help your business grow in much the same way that improving customer experience can. Customers spend 67 percent more when they’re part of a loyalty program, according to AnnexCloud. Their research shows loyalty programs can also influence affinity and how often people recommend your business to others as well.
3. Research the Competition’s Digital Strategy
Take a look at what your competitors are doing online. Examine the ads they place, their landing pages, websites, and other marketing collateral. Keep tabs on it for a few weeks or even months and watch for changes. If the way they promote themselves seems relatively stable, it’s a sign that they may have found a winning advertising strategy, which you can duplicate to achieve similar results.
Be mindful of “keeping up with the Joneses” here. Just because a competitor is doing something doesn’t mean it’s a successful strategy. For example, you may see a competitor release a series of video shorts. If you can see the view counts on them and they’re comparatively low, it’s not a strategy you want to borrow.
4. Be Adaptable
One of the biggest advantages small businesses have over large ones is that small businesses can pivot faster. You probably don’t need clearance from a board, approval from a legal department, or multiple massive teams to align before you can seize an opportunity. If you’re adaptable and ready to move, you’ll beat larger competitors to market and will have the first mover advantage.
5. Move into New Markets
The more traditional way of expanding a business is to move into new markets; to sell your current products or services to a new group of people. You can do this by finding a new demographic to target or by expanding geographically, perhaps with a new location.
6. Add New Offerings
New offerings can help you grow your business in multiple ways. First, it may allow you to reach markets that aren’t interested in your current offerings. Secondly, it may allow you to increase sales with your current customers.
Learn as much as possible before launching something new. Solicit feedback from current customers, research demand for similar offerings, or consider working with focus groups to find out if you’re investing in a winning opportunity.
7. Consider Franchising
If you have a replicable business model, proven profit, and unique offerings, franchising is an alternate way of expanding a business that won’t necessarily drain your resources.
Get Help Expanding Your Business with Invoice Factoring
Most methods for expanding a business require working capital at the onset, and businesses often struggle with cash flow crunches during periods of rapid growth. Therefore, it’s important to have a business funding solution in place at these times. Invoice factoring can help by accelerating payment on your B2B invoices. Most businesses qualify because it’s not a loan, and there’s no debt to pay back because your customers clear the balance when they pay their invoices. If it sounds like invoice factoring might have a place in your business growth strategy, learn more or get started by requesting a complimentary rate quote from Charter Capital.
A supply chain disruption can impact your ability to serve customers and run a profitable business. Issues can creep up at any time too. While you may not be able to prevent these disruptions entirely, you can take steps now to minimize their impact and be prepared, so your business operations recover faster.
On this page, we’ll cover a few types of supply chain disruptions, explore real-world examples, and then cover some tips that will help your business be more resilient.
What is a Supply Chain Disruption and Why Does it Happen?
A supply chain is comprised of all entities involved in creating a product and delivering it to a customer. It starts with the raw goods and finishes when the end user receives it.
For example, let’s say you decide to purchase a gold ring online. The first link in the supply chain is the raw materials, or the gold used to create the ring. The company mining probably sells the gold to a supplier. A manufacturer then takes it and turns it into a ring. The online retailer buys it, then sells it to you and ships it off.
Five entities are involved in this very basic example. There’s usually more than one type of raw good involved and often more links in the supply chain. If any of those links face an issue that prevents that ring from being made or reaching you, it’s considered a supply chain disruption.
Types of Supply Chain Disruptions
There are lots of supply chain disruption examples in everyday life. A few are covered below.
Pandemics: Supply chain disruptions from COVID-19 impacted 94 percent of Fortune 1000 companies, per Accenture research. Although this is an extreme example, it happens more often than people think. For example, the Swine Flu and the Avian Flu caused similar issues.
Natural Disasters: Hurricanes, floods, fires, earthquakes, and other natural disasters can cause supply chain issues too. For example, the 2011 Great Tohoku Earthquake and Tsunami took out a power plant in Japan. Because the plant-powered a factory that made components used in 60 percent of vehicles, carmakers across the globe were forced to shut down for a period of time. Wildfires across the western United States cause similar chaos by creating a shortage of wood used for pallets.
Transportation Delays: Issues like the trucker shortage, inclement weather, and seasonality often cause supply chain disruptions too.
Price Fluctuations: Cost shifts can happen for a variety of reasons. For example, when fires impact wood availability for pallets, the cost to make them naturally rises. Some manufacturers have reported costs doubling almost overnight. As trucking companies have had to work harder to keep pros behind the wheel, transportation costs go up too. Most people became acutely aware of pricing fluctuations during the pandemic as well. The price of eggs, for example, skyrocketed by more than 30 percent. The cost of PPE, such as masks and gloves that medical professionals rely on, has risen exponentially.
Cyber Attacks: Sometimes hackers specifically target a company, such as when Colonial Pipeline was hit with a ransomware attack. The incident disrupted gas supplies and increased prices. Other times, the attack is broader. The SolarWinds hack is an example of this. Often referred to as one of the biggest cybersecurity breaches of the 21st century, the hackers involved exploited a vulnerability in Orion software created by SolarWinds and used by more than 30,000 organizations to manage their IT. Once the malicious code was installed on an Orion system, it could spread to the data and networks of the business’s customers and partners. In other words, it effortlessly spread across entire supply chains, including government agencies.
How to Prepare for Possible Supply Chain Disruptions
Disruptions can happen at any time, so it’s important for businesses to take a proactive approach to supply chain risk management. Supply chain risk management commonly emphasizes the process of mitigation, reflecting limitations, additional tasks, and audits that adversely impact the value, as well as the complexity and velocity of sourcing processes and operations.
Strengthen Your Supplier Relationships
If you have strong relationships with suppliers, they’ll do their best to look out for you when there are supply chain disruptions. Treat suppliers like they’re part of your team, communicate with them often, and always pay them on time.
Build Up Your Inventory
Try to keep enough inventory on hand so that you have some breathing room and time to pivot if you face supply shortages. Remember that tying up working capital in excess inventory can hinder business growth. Identify the sweet spot for your business that allows you to run lean without compromising your ability to fulfill orders or meet demand if there’s an issue.
Supply Chain Planning System
Supply chain planning systems typically include the following components: Sales and operations planning offer businesses the opportunity to make better decisions that are informed by key supply chain drivers, such as sales, production, inventory, and marketing. By adopting the tenets of modern supply chain planning systems and relying on data instead of predictions, businesses can help make their operations and supply chain more agile and resilient.
Have a Customer Demand Management Strategy
There may come a time when you need to shift how you’re operating. It’s best to think through potential solutions when you’re not under pressure and are more likely to catch any unintended consequences of your intended path.
GM’s issues in the wake of the Japanese earthquake and tsunami are a prime example here. The company’s supply chain is massive and highly organized. Each component of a vehicle can take weeks or more to produce and needs to arrive on the assembly line at just the right time, as explained by MIT.
The company became unable to produce heated seats because of supply chain disruptions related to its electronic control modules. As a result, some company insiders called for GM to stop ordering the seats, but Bill Hurles, executive director of Global Supply Chain, recognized that path would have unintended consequences.
A shift away from heated seats would necessitate a shift away from leather seats, which heaters are commonly paired with. The company would then need to increase fabric seat orders, which could create its own set of issues. Furthermore, the lack of leather seats would impact the packages typically offered in vehicles, as higher-end models usually come with leather. Lastly, the company would still have leather seats and heated seats in various stages of preparedness scattered throughout its supply chain. Resolving the problem would be complicated.
GM decided to stay the course. Despite the fact that moving away from heated seats seemed like an easy solution, it created far more problems than it solved.
Explore various ways your business can manage customer demand if you’re in a similar situation, such as:
Substitution: Find ways to guide consumers to a product that isn’t impacted by the current supply chain issue, such as increasing the price of the affected item and lowering the price of a substitute item that isn’t.
Dilution or Stretching: See if there are ways to make your raw goods go further without impacting the quality and upsetting customers.
Triage: Know which products will receive priority treatment if you’re forced to decide which to produce or whom to serve.
Auction: Some companies switch to selling their products to whoever is willing to pay the most. Although this strategy can provide an immediate payout, it can also alienate loyal customers and damage the business in the long run.
Identify Backup Suppliers and Diversify Your Supplier Base
Work with a few different suppliers that come from different backgrounds. That way, if a regional or individual issue impacts one, you can bump up your orders with the others. Continue working with them and building up your relationships, so they’re more likely to help you out if you’re facing an issue.
Conduct a Supply Chain Vulnerability Audit
A key component of supply chain risk management is pinpointing potential issues in an audit or vulnerability assessment. This involves jotting down all of your raw materials and components, then making note of what controls or protections are in place for each. Then, use a four-point scale (very high, high, low, negligible) to assess the vulnerability of each item.
When you know your biggest risks, develop a plan to minimize the risk or establish a backup plan to ensure you won’t be without the item if there are delays or shortages.
How to Deal with a Supply Chain Disruption
Although you can take steps to minimize the impact of a supply chain disruption, it’s not always possible to prevent issues altogether. However, these tips can help you bounce back quicker.
Plan for Recovery
Keep the long-term health of your business in mind as you navigate supply chain issues. How you handle the disruption will impact how your customers and suppliers feel about you afterward.
Communicate with Customers
At a bare minimum, customers who are already waiting on delivery need to know why it’s delayed, what you’re doing to address the issue, and when you anticipate a resolution. However, it’s better if you set the right expectations by communicating before someone places an order. Consider sending an email to your loyal clients or including information on your website.
Evaluate the Impact on Cash Flow
Supply chain disruptions can:
Identify how the supply chain disruption impacts your cash flow and be prepared with a backup source of funding that can help you cover expenses if needed while you’re working things out.
Assess Buyer Behavior
Demand for certain products and services may shift while you’re working through your supply chain issues. Keep a pulse on what your customers want to see if there are opportunities to pivot away from products or services that have become difficult to produce.
Boost Cash Flow During Supply Chain Disruptions with Invoice Factoring
Invoice factoring is often used by companies that are experiencing rapid growth because it provides debt-free funding by accelerating payment on B2B invoices. However, it’s also an excellent option as a backup source of working capital because it’s flexible. When you factor and which invoices you factor is up to you. Plus, factoring can be tapped into quickly whenever the need arises, with the option to receive your advance as soon as the same day you submit your invoice. To learn more or get started, request a complimentary rate quote from Charter Capital.
Finding a self-employed health insurance plan that offers decent benefits, will actually cover you, and doesn’t cost an arm and a leg may seem like a daunting process. However, finding one that fits your needs is worth your time. On this page, you’ll get a crash course in self-employed health insurance, why you need it, and where to find it, plus get some tips to make your search easier.
Independent Contractor vs. Self-Employed vs. Small Business Owner
This guide is tailored to independent contractors and the self-employed.
Independent Contractor
If the person who pays you has control over the result of your work but not how the work is done, you may be considered an independent contractor. This includes freelancers and most gig workers, and may even encompass people in professional trades, such as doctors, lawyers, accountants, and contractors. One in ten Americans says being an independent contractor is their primary job, per Forbes.
Self-Employed
If you’re an independent contractor, then you’re considered self-employed according to the IRS definition. Around one in four people say they’ve been self-employed in the last year, per Forbes.
Small Business Owner
People often consider small business owners to be self-employed. Many reports use this methodology, too, so you may see the two distinguished as employer and non-employer small businesses. However, you have additional health insurance options available to you as a small business owner that are not available to independent contractors. This guide can still help you if you just want coverage for yourself or your family, but you’ll also want to investigate small business insurance plans, too.
What is Self-Employed Health Insurance, and Do You Need it?
Self-employed health insurance is simply individual (or private) health care coverage you can buy for yourself (and your family) on the government’s health insurance marketplace. Nearly half of all Americans get health insurance from their employer, according to eHealth. Also known as “employer-sponsored coverage,” these group plans are selected and purchased by an employer and made available to employees and their families, those who have recently left the company, and retirees of the company. If this description seems to apply to you, it’s important to explore your options for self-employed health insurance. Employers usually cover part of the plan’s premium, too.
Without an employer to select a plan or subsidize some of the cost, those who are self-employed must purchase individual coverage for themselves.
How Does Health Insurance for the Self-Employed Differ?
With employer-sponsored coverage, your options are limited to what your employer selected. That means you might not be able to get the level of coverage you want or have coverage when you visit your preferred providers. However, if you work for a large company or one with a skilled negotiator, the organization will often be able to secure a plan with lower premiums and out-of-pocket costs.
Health insurance as an independent contractor will often be more expensive because you don’t have collective bargaining power behind you. There’s no employer paying part of your premium either, though sometimes people qualify for government subsidies instead. You’re free to choose your insurance company, plan, level of coverage, and other details. You can also connect with your preferred providers to find out which insurance plans they accept and then choose a plan that allows you to stay with them.
One other big difference between the two is how premiums are paid. With an employer-sponsored plan, your premium can be taken from your paycheck before taxes. This isn’t an option for the self-employed.
Why It’s Not a Good Idea to Be Uninsured
Not having independent contractor health insurance is risky. Costs from preventative care, tests, and other standard medical visits can add up. In addition, it can be financially catastrophic if you face a serious illness or injury without self-employment health insurance too.
Tax Penalties
There was previously a federal law that required everyone to have health insurance. Unless you qualified for an exemption, you were fined when you paid your taxes if you didn’t have insurance. This federal law no longer applies, but some states have since enacted their own with similar penalties.
Tax Benefits
If your qualifying medical expenses exceed 7.5 percent of your adjusted gross income, and you choose to itemize deductions, you can deduct the portion that exceeds 7.5 percent, according to the IRS. In addition, self-employed premiums are generally considered qualifying expenses.
Out-of-Pocket Costs
Out-of-pocket costs can be considerably more for someone who is uninsured. For example, the average base cost of an emergency room visit before procedures is $1,082, according to a Consumer Health Ratings report. Uninsured patients pay $138 more, coming in at $1,220.
Visiting a physician is more expensive, too. Most insurance plans are now required to cover 100 percent of preventive care, including an annual physical and any recommended tests. If you’re uninsured, these costs are on you.
How to Get Health Insurance as an Independent Contractor
There are lots of different ways to obtain self-employed health insurance or get on a plan if joining an employer-sponsored plan isn’t an option.
The Federal Health Insurance Marketplace or State-Based Marketplaces
The federally facilitated Health Insurance Marketplace makes it easy to compare health insurance plans. It offers coverage and cost details across various plans from different insurance companies and allows visitors to sign up directly through the site. Plus, those interested in exploring tax credits or other government programs like the Children’s Health Insurance Program (CHIP) can find out if they qualify there, too.
Some states have their own marketplaces that work similarly. The latest list is available on HealthCare.gov.
Medicare and Medicaid
Medicare is a federal insurance program. It’s primarily used by people with disabilities and those over age 65. There are many different Medicare plans, and each will have unique benefits, though most work like traditional plans in that there is a monthly premium payment and deductibles. Additional information is available at Medicare.gov.
Medicaid is a state medical insurance program designed to help low-income individuals and families. If you think you might meet the criteria, you can check at HealthCare.gov.
Private Health Insurance
Sometimes insurance companies sell policies outside of the marketplace, too. On one hand, these can sometimes have wider provider networks. The tradeoff is that they usually attract those providers by paying them higher fees, and some or all the extra cost is passed on to you in the form of higher premiums. Others offer plans designed specifically for the self-employed. It can be difficult to wade through all the different companies and individual plans offered by each company, so there are often benefits to working with an independent insurance agent who already knows what’s out there and can help you find the best plan for your needs.
Health Care Sharing Ministries
Health care sharing ministries (HCSMs) are not insurance, but they may be an alternative for some people. Instead of signing up with an insurance plan, you join a health-sharing group and pay a monthly “share fee” rather than a premium. All the funds are pooled together. You’d then visit your provider and pay toward your “annual unshared amount,” which is like a deductible. The self-employed health insurance deduction allows eligible individuals to deduct the cost of health insurance premiums on their tax returns. When you reach your annual unshared amount, the joint fund kicks in and pays out according to the plan’s guidelines.
The positives are that share fees are usually less expensive than insurance premiums, and there are no network requirements. You can usually see any provider you wish. On the downside, these aren’t insurance plans, so they’re not required to pay for preventative/ wellness visits, and many don’t offer coverage for things like mental health.
HCSMs are classified as charities, and all members must “share a common set of ethical or religious beliefs and share medical expenses among members in accordance with those beliefs,” according to the Affordable Care Act. That means most have a religious undertone, though they tend to be non-denominational. Because of this background, they also tend to have moral and ethical standards for their members. For example, most prohibit tobacco use, and many prohibit alcohol.
Employer Plan Through a Family Member
Most insurance companies only allow enrollees to add their spouses and children to their plans. However, some have a wider window and open it to others who are dependent on the enrollee, and a select few allow other family members to be listed. Although you may not find coverage this way, it doesn’t hurt to check.
Association Health Plans
Are you a member of a professional association? If so, check if they offer an association health plan (AHP). The rules vary depending on the association. For example, you may be expected to pay membership dues to qualify or prove that you meet their membership criteria. In addition, some AHPs for the self-employed require members to provide tax returns to prove they’re self-employed.
The positive side is that some associations have bargaining power based on their numbers, similar to large corporations. However, most are smaller, so you may see lesser coverage and higher premiums. Each one should be evaluated independently.
What Types of Health Insurance Are Available to Independent Contractors?
When self-employed individuals begin considering health insurance, one of the first questions to answer is what types of plans exist and how they differ. Understanding these differences is key to selecting the right health insurance based on your needs, budget, and access to health care services.
Most individual health insurance falls into categories defined by how care is delivered. HMOs (Health Maintenance Organizations) typically limit coverage to providers within their network and often require referrals for specialist care, which helps keep costs lower. PPOs (Preferred Provider Organizations) offer more flexibility in provider choice and don’t usually require referrals, though premiums and out-of-pocket costs may be higher. EPOs (Exclusive Provider Organizations) and POS (Point of Service) plans combine elements of HMOs and PPOs in different ways. These distinctions affect how you access care, pay for services, and select providers.
Choosing between these types of health insurance depends on your household income, how frequently you need care, and the kind of benefits for contractors that matter most—whether that’s hospital care, access to specialists, or affordability. For self-employed individuals, plans must be weighed carefully to ensure the insurance policies match both current and future needs.
Health Insurance Options for if You’re Newly Self-Employed
If you’re newly self-employed, you have a few additional options.
COBRA
The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) requires most employers to allow former employees to continue their insurance coverage for a limited period of time under certain circumstances. The benefit is that you can generally keep your insurance plan while you transition. The downside is that the employer is not likely to cover any of the premium costs, and you may end up paying up to 102 percent of the plan’s cost.
Short-Term Health Insurance
Short-term insurance can cover you for up to three months, and you can enroll outside of normal enrollment periods. The premiums are usually less expensive than what you’ll see with COBRA, too. However, pre-existing conditions aren’t usually covered, and you’re likely to have high out-of-pocket costs.
How Much Does Health Insurance Cost if You’re Self-Employed?
A lot goes into determining the cost of self-employed health insurance—everything from the plan benefits to your habits, age, and location impact what you’ll pay.
To give some context, the average premium in the United States is $456 per month or $5,472 annually per KFF. Vermont residents top the chart at $861 per month, while people in New Hampshire pay just $323. Here in Texas, where Charter Capital is headquartered, the average is $461.
Tips for Choosing Health Insurance if You’re Self-Employed
Ready to start your search? These tips can help you find the right plan quicker.
Make a List of Priorities
You probably aren’t going to find a plan that lets you see any provider, plus has low premiums and deductibles, and has high coverage. Know what’s most important to you in a plan before you begin shopping.
Work with a Broker or an Agent
An independent broker that works with multiple insurance companies can help you find the best plan for your needs.
Investigate Subsidies
Even if you’re earning well, you might still qualify for tax credits and cost-sharing subsidies. It’s a good idea to run your numbers through the federal healthcare marketplace to be sure.
Be Open-Minded
Options like a cost-sharing network or a health savings account may help you bridge the gap between what you want and what you can afford at this stage.
Accelerate Your Business Cash Flow with Charter Capital
Although we can’t make the perfect self-employed health insurance plan instantly materialize for you, we can help you accelerate payment on your B2B invoices, so you can invest in company growth and cover other daily expenses. Connect with us for a complimentary rate quote.
Budgetary cuts and the shift to remote work have many business owners questioning the importance of team-building activities. With nearly one-third of employees saying they dislike team-building exercises per Wakefield research, it only makes sense that these activities would be among the first to go. But, if your idea of “team building” is trust falls, group juice cleanses, or paintball excursions, it might not be the concept that’s failing your business. It’s the application.
Below, we’ll dig into why team building is important and how to get it right, so your company receives tangible benefits from your investment, and your team walks away with a meaningful experience.
What Team Building is NOT
Before we get into the importance of team building, explore what it’s not. The examples of juice cleanses and paintball wasn’t made up. They made it into the “worst team-building exercises in history list” according to The Hustle, right along with rope courses and Lego for Lunch programs. With ideas like this in play, it’s no wonder team building gets a bad rap. For clarification, team building is not:
An activity without a tangible benefit.
Just a way to break the monotony at work.
Something that has nothing to do with your job.
What Makes for Effective Team Building?
There are a million different types of activities that have the potential to work, but at the heart of it, the most effective team-building exercises:
Are performed outside the office or are somehow removed from the work environment.
Require employees to focus on a shared goal or achieve something together.
Require collaboration and teamwork.
Leverage skills that participants require at work.
Are somehow carried back into the work environment afterward.
Benefits of Team Building: What is the Purpose of Team Building?
Now that we’ve got some background, let’s dig into why team building is important and some of the benefits your company can achieve with the right approach.
Team-Building Activities Make Employees Feel Valued
Only 36 percent of organizations have employee recognition programs, according to Gallup research. While team building exercises can’t replace a solid employee recognition program, they do offer the opportunity to recognize employees, particularly for skills and behaviors employees might not see during daily work. Activities such as this also show the team you’re investing in them, their future, and their happiness, which helps boost morale.
Brings Different Departments Together and Encourages Teamwork
One of the challenges with larger companies is that employees have the tendency to break off into subgroups based on department, interests, or background. The team, as a whole, suffers when this happens because there’s less collaboration and teamwork. By bringing everyone together and having them work toward a shared goal, barriers are broken, and collaboration across the greater group improves.
Team Building Makes Work More Enjoyable
A well-thought-out team-building exercise isn’t just an opportunity to break the monotony at work, but it can do just that. Oftentimes, people share laughs in the moment and when everyone is back at work.
Reveals Unknown Skills
People often exhibit whatever behavior they believe is expected of them, so at the office, you might never know that someone is a math whiz, is adept at solving puzzles, or has a knack for leading groups. By pulling them out of their accustomed environment, you’re likely to see the team shine in ways you didn’t know they could.
Boosts Employee Engagement and Staff Morale
Engaged employees are 22 percent more productive, according to Harvard research. Yet, a mere 36 percent of employees are engaged per Gallup polls, and a whopping 21 percent of employees are actively disengaged. Team-building exercises can help pull people out of their slumps and reignite their passion for both the company and their comrades.
Improves Problem-Solving Skills
Interestingly, the best team-building exercises help develop problem-solving skills. When employers move beyond basic exercises like icebreakers and host activities that involve brainstorming or puzzle-related activities, the overall results are better, researchers say.
Enhance Communication and Trust
Another key component of strong team-building programs is greater trust between team members. Researchers say there’s a physiological reason for this: the release of oxytocin. As people share an experience requiring trust and a positive outcome, oxytocin is released, thus boosting feel-good vibes for fellow teammates.
Helps Establish a Workplace Culture That Attracts and Retains Top Talent
Team-building exercises contribute to positive workplace culture by boosting morale, showing employees they’re valued, and strengthening collaboration. In addition, because 40 percent of job seekers consider colleagues and culture when selecting a new job per LinkedIn research, team-building activities have the potential to help businesses attract and retain top talent too.
Improves Collective Employee Productivity
Greater morale is associated with higher levels of productivity, according to research published in the Work and Occupations journal. Increased teamwork and communication have also been shown to improve productivity in other studies. All these areas can be strengthened through employee team-building exercises.
Team Building Ideas
The results are clear. Team building offers many benefits for businesses, but only if the organization takes a mindful approach when selecting activities. To ensure your team and business get the most out of your investment, avoid activities that have the potential to single people out and ensure any activity you choose requires collaboration, communication, and problem-solving. Some ideas that may work include:
Escape rooms (even virtual ones may work)
Mystery games (like Clue)
Scavenger hunts
Volunteer work
Build a Stronger Business with Invoice Factoring
Whether you need cash on hand for a team-building activity, are trying to build out your team, or simply need to accelerate cash flow to help with everyday expenses like payroll, invoice factoring can help. Unlike loans or lines of credit that create debt, factoring is like getting an advance on your B2B invoices that are paid off when your client pays their bill, so you’re always moving forward and growing. To learn more or get started, request a complimentary Charter Capital rate quote.
Looking for brain foods to boost your business intelligence? While there are no proven foods that make you smarter, there are foods that help your brain perform at its best. Below, we’ll explore the science behind this, dig into a few things you may want to start incorporating into your diet and cover a handful of non-food tricks that can help you gain an edge too.
What Makes a Person Smart?
Many people consider intelligence quotient (IQ) scores as a definitive measure of intelligence. The folks at MENSA are likely to agree. The organization breaks down the “distribution of human intelligence” based on IQ scores and only accepts members who fall within the top two percent of the general population.
The catch is that the modern IQ test is more about gauging intellectual potential through a series of logic and reasoning questions. More recent research shows it’s largely influenced by motivation, according to the American Association for the Advancement of Science (AAAS). Furthermore, scores are impacted by factors such as health conditions, culture and environment, access to education, and nutrition per Healthline.
In other words, there’s no universal measurement of intelligence. The measure that’s used the most is not infallible, and it’s more about measuring potential, not knowledge or practical application thereof.
How Diet and Brain Function Are Connected
If you’ve ever been hangry at work, you don’t need to be told that skipping meals makes it hard to focus, but proper nutrition impacts cognitive function on much deeper levels too.
Your brain relies on all sorts of compounds produced by your body to function properly. Your body generally creates these compounds on its own, but it needs the right building blocks to do it. You get them by eating right.
Your brain also needs other parts of your body to function at its peak. For example, good cardiovascular health helps ensure your brain has adequate blood flow. Diet is a big part of keeping all your other systems healthy.
10 Foods That Can Boost Your Brain Function
Below, we’ll break down some of the best foods for brain health, how they support brain health, and alternate brain foods that might work for you if you’re on a special diet.
1. Leafy Green Vegetables
Consuming leafy greens like spinach, kale, collards, and lettuce have been linked with slower age-related cognitive decline, according to research published by the NIH National Institute on Aging. Researchers think it’s because they’re rich in folate, phylloquinone, nitrate, α-tocopherol, kaempferol, and lutein, which each provides some benefit individually.
Scientists compared two groups: those with high consumption, who eat 1.3 servings per day, and those with the lowest consumption who eat around 0.9 servings per day. Those who eat more are at least 11 years younger cognitively than their counterparts.
2. Berries
Compounds found in berries appear to protect the brain from oxidative stress, according to Rutgers research. The compounds also counteract advanced glycation end-products, also known as AGEs. These are proteins and lipids that become glycated after exposure to sugars. Because AGEs contribute to the development of atherosclerosis or plaque buildup in arteries, berries may help prevent issues like Alzheimer’s and dementia.
In studies, participants were given diets rich in strawberries and blueberries. Researchers found that those eating more berries perform better in memory tests. In tests with just blueberries, participants showed more blood flow to key areas of the brain as well as improvements in attention to tasks and memory.
Experts say that although blueberries tend to be chosen more for studies, the same compounds that are likely responsible for improved memory are also present in other vibrant berries, such as strawberries, raspberries, and blackberries.
3. Fish
When you research brain-boosting foods, fatty fish is often at the top of the list. Omega-3 fatty acids are the magic compound when it comes to fish, according to the Academy of Nutrition and Dietetics. More specifically, docosahexaenoic acid, otherwise known as DHA, has been shown to reduce brain inflammation that leads to cognitive decline and brain fog, thereby helping with improved memory. Researchers also note that those with low levels of DHA are more likely to suffer from Alzheimer’s later in life. Experts say it’s best to think of fish “as a savings plan for your brain, not a winning lottery ticket,” because results are typically seen with long-term consumption of oily fish versus immediate.
The goal here is to get two four-ounce servings of fish per week and to target options such as salmon, tuna, Atlantic mackerel, herring, and trout. While some fish, such as shark, swordfish, and king mackerel, may also fit the criteria, it’s better to avoid them due to high mercury levels, according to the EPA.
Those on vegan or vegetarian diets can also get a boost through plant-based sources such as ground flax seed, walnuts, and chia seeds. These are rich in AHA, of which the body will convert approximately 15 percent into DHA, according to the Academy of Nutrition and Dietetics. Supplements made from algae may also be an option.
4. Nuts
Certain nuts can be a boon for brain health too. Again, walnuts are a good source of AHA, according to research published in The Journal of Nutrition, Health, and Aging. Similar to fish, improved cognitive function is usually only seen in participants with a greater long-term intake of nuts. Some nuts, such as almonds and hazelnuts, are rich in vitamin E, which is also associated with better mental performance.
5. Citrus Fruits
Vitamin C is crucial to cognitive performance because it’s a powerful antioxidant and works as a neuromodulator. It helps cells use neurological chemicals like dopamine. People with neurological issues like Alzheimer’s also typically have much lower concentrations of vitamin C compared to their counterparts, according to systematic reviews.
A single orange contains almost the full recommended dietary allowance (RDA), according to Healthline. Pink grapefruits, mandarins, and limes are also good citrus sources. Those wanting vitamin C from non-citrus sources can go for strawberries, brussels sprouts, or even broccoli, among other things.
6. Fermented Foods
Modest gains in cognitive ability are seen when people consume fermented foods, some studies show. Although researchers aren’t certain of the link or how it works, research suggests that fermented foods alter the composition of gut bacteria, which may make the body better at creating neurotransmitters such as GABA (related to mood, anxiety, and sleep), norepinephrine (related to alertness, attention, mood, and memory), serotonin (related to mood and sleep), and dopamine (related to sleep, mood, and attention).
Dairy products, including many kinds of cheeses, butter, and yogurt, are often fermented. Kefir, sauerkraut, pickles, sourdough bread, and soy sauce all fit within this bracket too. However, fruits, vegetables, cereals, and drinks may all be fermented too. They’re typically marketed as having probiotics or prebiotics, so they’re easier to spot.
7. Coffee
Caffeine promotes central nervous system stimulation, which makes people feel more alert, according to research presented in Healthline. It may also boost the ability to process information and stimulates the release of neurotransmitters like noradrenaline, dopamine, and serotonin. Some research suggests it may help improve memory too.
With a typical eight-ounce cup of coffee containing 96mg of caffeine, coffee is one of the quickest ways to get a boost. It’s also one of the few options shown to reduce Alzheimer’s risk by 65 percent. Those put off by a morning cup of Joe may find black tea more palatable, which comes in at 47mg of caffeine per eight-ounce cup, or green tea at 28mg, according to the Mayo Clinic.
8. Dark Chocolate
The flavanols in cocoa are credited with giving chocolate many health benefits. Increased circulation and blood flow to the brain are seen in some studies. Improved attention, verbal learning, and memory have been observed in younger study participants consuming cocoa per NIH research. Older adults who are already experiencing some cognitive impairment may also see improved cognitive function with the help of cocoa flavonoids. Current research shows the chance of progressing to dementia may diminish too.
It’s important to note, however, that these studies focus on cocoa and mention dark chocolate because it contains anywhere from 50 to 90 percent cocoa solids. Milk chocolate, on the other hand, only has ten to 50 percent cocoa solids and is loaded down with sugar and other additives. If you’re trying to boost your brain power, it’s best to go with the darkest chocolate you can find.
9. Eggs
When it comes to eggs, choline is the magic compound, and some of the most abundant amounts of this nutrient can be found in the egg yolks alone. The body uses it to create the neurotransmitter acetylcholine, which is responsible for mood and memory, according to NIH research. It’s also linked to greater dopamine availability.
A single egg boasts a whopping 147mg of choline, which is 27 percent of the RDA. The only thing that tops it is beef liver. A three-ounce portion delivers 65 percent of the RDA. Those hoping to avoid animal products can get choline through soybeans. A half-cup portion delivers 19 percent of the RDA.
10. Turmeric
Research on turmeric is still emerging, though experts think curcumin, the antioxidant that gives turmeric its yellow hue, may be good for memory too.
Older adults already demonstrating memory problems were split into two groups for a study. Half took 90mg of curcumin twice per day, and half took a placebo for 18 months. Those taking curcumin improved their memory test results by 28 percent over the course of the study. Researchers also noticed the group had lower levels of beta-amyloid and tau in the hypothalamus and amygdala brain regions; a sign that they may have reduced risk for Alzheimer’s thanks to the curcumin.
Turmeric is the best source of curcumin, though it’s also found in mango ginger and curry powder. Those put off by the taste can find it in supplement form, like what the study participants consumed.
Other Ways to Boost Your Brain
A person’s IQ tends to stay about the same throughout their life, so there’s little you can do to boost your IQ. However, there are some things you can do to help train your brain and keep it in top form that doesn’t involve food.
Memory Games
It may seem like a given that playing memory games would boost memory, but that isn’t always so, according to Dignity Health. What you play matters as much as you play. People who do word puzzles, for example, have better short-term memory, reasoning, and attentiveness. More research is needed to uncover other activities that genuinely help.
Exercise
Cognitive decline, including dementia, is almost twice as common in adults who are inactive compared to their counterparts, according to the CDC. Target at least 150 minutes per week of moderate physical activity to keep your body and your brain healthy.
Visuospatial Reasoning and Cognition Activities
Visuospatial reasoning relates to being able to understand how things work or fit together – for example, being able to read and use a map.
Completing jigsaw puzzles may also improve cognition, according to recent research. Those reporting years of jigsaw puzzling before the study tended to perform better than their peers on tests. Meanwhile, those both with and without prior experience also tended to perform better, but only if they connected at least 3,600 pieces in a 30-day period.
Learn a New Language
Previous studies have shown that being bilingual can delay dementia onset by several years, according to the BBC. The big question, then, was whether people with better cognitive abilities were more likely to become bilingual or if learning a new language was the trigger. Newer studies suggest the latter, with those learning a new language also improving in areas like attention and focus.
This may be because learning a new language is a novel activity, so engaging in other forms of cognitive stimulation may be helpful too. “The quality of the stimulating activity is important. For example, if the activity is novel, engaging, challenging, and enjoyable, that will arguably be better for your brain,” explains Duke Han, Ph.D., a neuropsychologist at Keck Medicine of USC.
Get Enough Sleep
A night of missed sleep does more than make you groggy. Sleep is imperative for brain plasticity. It impacts whether we’re able to process things we’ve learned during the day and makes it harder to remember what we’ve learned in the future, according to Johns Hopkins Medicine. Doctors also say that sleep facilitates the removal of waste products from brain cells.
Although sleep needs vary from one person to the next, experts say to target seven to nine hours per night. Anything less shortchanges your health. Anything more could be a sign of an underlying health condition.
Manage Stress
Moderate stress can actually help improve brain performance by strengthening the connection between neurons, according to the Premier Neurology and Wellness Center. However, chronic stress is a whole different matter. Their research shows that stress may kill brain cells and shrink the brain. While the brain is constantly forming new neurons, those created during periods of stress are more likely to die within a week too.
Stress can also permanently change the brain’s structure. More white matter, which is responsible for communication, is created at the expense of gray matter, which is responsible for decision-making and problem-solving during times of stress.
Even minor stressful events can impact memory as well. For example, you’re more likely to forget where you put your keys when you’re running late. Experts say this is because your brain goes into “survival mode” instead of “memory mode” when you’re under stress.
Find ways to manage and relieve stress. Yoga and meditation work for some, while others prefer a workout or hot bath. It’s also helpful to delegate tasks that don’t need your direct attention, so you’re not bogged down by unnecessary work.
Keep Your Business Sharp with Invoice Factoring
Invoice factoring isn’t brain food, but it could be considered the same for your business. Instead of waiting 30 or more days to get paid, your factoring company advances you most of an invoice’s value as soon as the day you submit your invoice. At Charter Capital, we also perform free credit checks on your clients to help guide your decisions and handle collections for you, so you can focus on the core areas of your business and stress less about cash flow and working capital. To learn more or get started, request a complimentary rate quote.
Struggling with labor shortages and rising labor costs in the U.S.? Hiring and retaining employees is the greatest challenge for small businesses today, according to a recent Goldman Sachs report. Nine in ten businesses that are hiring say finding qualified candidates is a challenge. Meanwhile, wages and salaries are up more than five percent year-on-year, per Reuters. Spurred by the tight labor market, it’s the largest cost of labor hike seen in 20 years.
Why is There a Labor Shortage in the United States?
While some might argue that there was never a labor shortage, sharp declines in nonfarm payrolls during and after COVID, as reported by the Bureau of Labor Statistics, show otherwise. Some of this can be attributed to people taking early retirement. Around 1.7 million people left the workforce earlier than expected, according to McKinsey. Their research also shows immigration slowed during the pandemic, further impacting the labor supply.
However, the greatest pains were felt, not by people leaving work entirely, but by leaving their roles or industries in search of better conditions and benefits. Today, BLS data show workforce recovery and even more people in the workforce now than pre-COVID, yet net losses linger in certain sectors.
What Industries Have Been Affected the Most?
Professional and business services and finance have had the largest labor force shortage per U.S. Chamber of Commerce analysis. The Leisure and hospitality industries, durable goods manufacturing industry, and wholesale-retail trade, in that order, round out the top five. Unfortunately, many have not yet recovered.
Other industries have been disproportionately impacted by the Great Resignation, forcing employers to redouble their recruitment efforts. The Healthcare industry, for example, saw a 3.6 percent year-on-year uptick per HBR. Resignations in tech increased by 4.5 percent too. Their research shows that resignation rates tend to be higher among employees in fields with extreme demand increases due to the pandemic.
5 Tips to Reduce Labor Costs
Businesses may be tempted to reduce employee salaries, but in this market, it’s important to lower your costs, not your wages. Cutting wages will only cost you employees, increasing your costs for labor even more. Let’s take a quick look at some cost-cutting alternatives.
1. Optimize Employee Scheduling to Reduce Overtime
Overtime is expensive and often unnecessary. If you’re currently paying employees overtime, investigate why it’s happening. Sometimes employees take it upon themselves to put in extra hours or simply do so out of habit. Other times, work needs scale, but employers don’t adjust schedules or bring in additional help to eliminate the need for extra hours.
Establish company policies related to overtime and educate your team about when it’s appropriate to log additional hours. For example, some companies require a manager’s approval before overtime can be worked, while others structure employee schedules in a way that prevents the potential for overtime.
Explore options like freelance and outsourcing or seasonal employees if the workload occasionally demands extra hours. These solutions tend to be more affordable, plus they go a long way toward ensuring your tenured employees don’t get burned out by excessive hours.
2. Automate Repetitive, Manual Tasks
Automation allows your team to do more with less and boosts productivity. Dig into your current technology to see if there are additional capabilities you’re not leveraging. For example, maybe your CRM can automate client emails or handle some task management to boost cost savings. Perhaps your billing software can automatically generate digital statements, allow clients to pay their bills through a customer portal, and automatically log payments. Explore alternatives if your current software and technology aren’t relieving your team of repetitive manual tasks.
3. Reduce Staff Turnover
Businesses spend an average of one-half to two times an employee’s salary to replace them, according to Gallup. Their research shows that a typical 100-person organization with an average salary of $50,000 spends $660,000 to $2.6 million per year in turnover and replacement costs.
4. Reskill and Upskill Your Workforce
Educating your employees is one of the best ways to boost productivity. Consider creating a formal training program if your company doesn’t already have one, or design a program that enables employees to seek outside training that can help them perform better at work or take on new tasks.
5. Explore More Ways to Boost the Productivity of Your Workforce
You may have hidden productivity leaks throughout your company. Consider how tasks are handled, how your team manages projects, and how people communicate. Ask employees for ideas that can help your company level up. Because they’re the ones handling tasks day in and day out, they’re likely to see ways to boost productivity or at least point you in the direction of an issue, even if they don’t know the solution.
It’s also worth noting that employee morale and engagement also have a significant impact on productivity. Send out anonymous surveys to get honest feedback on how people feel about the company and workplace environment. If they’re not excited and passionate about their work, it’s time to make changes.
10 Ways to Combat the Labor Shortage
With labor scarcity impacting so many and seemingly no end in sight, finding new ways to recruit and manage businesses with fewer employees is essential. We’ll dig into ten strategies that can help with this below.
1. Get Creative with Recruitment/ Diversify Your Recruitment Pool
Businesses that make diversity and inclusion a priority grow faster and outpace their peers financially, according to McKinsey research. They’re more innovative, and their teams are happier too. However, businesses don’t create diverse teams by chance. You must have a plan to build diversity into your hiring process, which involves sourcing from different talent pools and offering potential candidates some room to grow into their new roles.
2. Offer Career Growth Opportunities
You may feel that if employees perform well, positions will naturally open for them as the company and their skill sets grow. While this may be true to some degree, your team needs a clear path and specific actions they can take to climb the ladder. Spend time creating a plan for your current team. Consider creating an internal mentorship program in addition to your training and promotion scheme. This will make higher roles more visible to the team, foster inclusion, and provide mentors with opportunities to expand their leadership skills.
3. Reduce Staff Turnover
Hiring new employees is expensive and drains precious resources like time. Do whatever you can to hold onto your current team, and you’ll have fewer concerns about finding replacements.
4. Make the Job Application Process Easy
You’ll get a wider candidate pool if you make the application process as easy as possible for people.
Lower barriers to entry by creating a list of preferred skills rather than must-haves.
Create a clear job description that includes duties and pay, so potential candidates don’t have to dig for it.
List your job in many locations, so it’s easy to find and attracts a diverse pool.
Optimize the listing for each site to ensure candidates don’t have to jump through unnecessary hoops or enter duplicate information.
Outline the hiring process to give candidates a clear picture of what to expect along the way.
5. Offer Flexible Scheduling
Eight in ten employers now offer flexible scheduling, according to a World at Work survey. While the concept was once touted as a boon for working parents, modern employers understand that employees from all backgrounds benefit from work/life balance. Unfortunately, if your business isn’t up on this trend, it’s likely losing candidates to employers that are.
6. Consider a Hybrid Work Environment
Following the coronavirus pandemic, many members of the working class began prioritizing a work-life balance similar to the one they experienced when the world was forced to work remotely. According to a 2022 survey, 44% of U.S employees prefer the hybrid working model, and 55% would prefer to work from home for at least three days out of the week.
Considering a hybrid working environment during a labor shortage is one of the best ways to attract new hires, improve employee retention, increase job satisfaction, and cut costs in your business.
More than half of all employers support hybrid work, according to a recent Remote Work & Compensation Pulse Survey. The survey also revealed that nearly two-thirds of high-growth companies leverage a hybrid work model. Although it’s not appropriate for every role or company, you’ll attract more candidates and may cut costs by allowing employees to work remotely at least some of the time.
7. Look into Better Employee Salaries and Perks
Many businesses worry about the increased cost of boosting salaries, but that’s only part of the picture. As demonstrated earlier, it’s far less expensive to keep an employee in place, even at a higher salary, than it is to hire someone new every year or two. Keep your employees happy with competitive salaries. If you’re not in a position to offer higher salaries immediately, consider adding in some merit-based bonus system that automatically increases wages with sales. Not only will this address the salary concern, but it may keep employees more motivated because their income depends on company performance.
Getting creative with employee perks can help too. For example, gym memberships and health programs are big. Time off for volunteering, unlimited PTO, and employee recognition programs are popular options too.
8. Prioritize Workplace Culture
Positive workplace culture has been shown to improve teamwork, raise morale, boost productivity and efficiency, and strengthen employee retention, according to Forbes research. Invest time outlining your company goals for overall attitudes and behaviors, then develop policies to support them.
9. Foster Engagement and Effective Communication
Traditional team-building exercises may be out due to remote work environments, but that doesn’t mean employees can’t collaborate or work together. Ensure your team has the basic building blocks of good communication, including instant messaging and project management tools. Invest time in virtual getting-to-know-you exercises and encourage tenured employees to connect with newer team members one-on-one. Host joint meetings whenever it makes sense to do so. For some companies, that might still be a virtual standup every morning at 8. For others, it may be a monthly or quarterly session to review goals and progress.
10. Invest in Training
One of the biggest things you can do to show an employee that you appreciate them and see value in them is to invest in additional training. At a basic level, that includes cross-training, so team members can cover duties for others as needed. It’s also important to include ongoing training that can help keep their skills sharp, as well as upskilling and leadership training that will empower them to advance within the company. Offering training that allows your employees to learn new skills and grow their current skillset not only improves retention but also makes your company more attractive to qualified workers, helping you tackle the problem of hiring new workers.
Invoice factoring allows you to instantly turn your unpaid B2B invoices into cash – no more waiting 30, 60, 90, or more days for your clients to pay. Factoring can help ensure you have cash on hand for payroll, recruitment, and other vital expenses. When you partner with a company like Charter Capital, you also free your business from many collections-related processes. If your business struggles with increased labor costs and shortages, find out if factoring is right for you. Request a complimentary Charter Capital rate quote.
Most businesses born in the digital age are equipped with the tools required to operate seamlessly in a connected world by default. Those who have been around for any length of time, however, must be moving toward digital transformation to remain competitive and grow. We’ll cover what this means, along with some of the benefits and challenges, so your business can reap the benefits while avoiding the most common pitfalls.
What is Digital Transformation?
Digital transformation is the process of leveraging digital technologies across your business processes and customer experiences to meet new market requirements and changing business needs. Moving away from post-it notes for to-do lists to a proper project management tool is one example. Switching from spreadsheets to a CRM for customer and order management is another.
9 Benefits of Digital Transformation for Small Businesses
The benefits of digital transformation are innumerable for businesses. We’ll go over a few of the biggest below.
1. Enhanced Data Collection
The average person spends nearly seven hours on screens each day per Comparitech. This gives businesses an incredible amount of data that can be leveraged to understand the needs of consumers better, improve offerings, and streamline funnels.
2. Data-driven Customer Insights Allow a More Customer-Centric Business Strategy
We often think of data in terms of marketing initiatives. For example, 67 percent of brands use their data to craft messages that resonate with their audience segments, according to Forbes research. However, this is only part of the picture. Imagine having data at every customer touchpoint. You can tailor the whole customer experience, not just the words you’re using in marketing.
3. Stronger Resource Management
The average enterprise-level company has 900 applications per MuleSoft research. When digital transformation becomes a priority, they’re able to cut back by 29 percent. That, in and of itself, frees resources to be used in more meaningful ways, but it’s only one example. You’ll see all sorts of savings sprinkled throughout this benefits section and ways resources can be reallocated for the betterment of companies.
4. Customer Experience Improves
A basketball team recently took up the digital transformation challenge by creating a new app for its fans, per EY reports. With the app, the team could track ticket sales and attendance as well as food and beverage sales. Naturally, this put them in a better position to price tickets and adjust pricing on-demand to find a perfect balance between revenue and filling to capacity. They also used the app’s insights to gauge friction points within their arena. For example, their data and AI now make it easier for fans to find the shortest lines for bathrooms, concessions, and parking. Similar approaches are seen in how AI is being used in customer service to reduce wait times, personalize support, and route inquiries more effectively.
5. Collaboration Improves and a Digital Culture is Fostered
Data silos, for example, create business challenges for 83 percent of businesses, according to the same study. Streamlining and merging data means teams can work more collaboratively with increased visibility and deeper understanding.
6. Business Profits Increase
One of the biggest reasons companies engage in a digital transformation is to boost profit. It can certainly have a huge impact, but the degree depends on the level of maturity seen in their initiatives. For example, companies with a lower digital transformation maturity level tend to have a net profit margin that’s 15 percent higher than their peers, per Deloitte research. It jumps to 43 percent with companies at a higher maturity level.
7. Agility Improves
Companies that embrace digital transformation have a wealth of data at their fingertips that makes it easier to identify new opportunities and understand where to draw resources from.
8. Employee Productivity Increases
Employee productivity jumps by 25 percent when companies go digital, according to McKinsey research. It’s easy to understand how that happens when people are moving away from silos and sheets of paper to centralized data, but even this can be taken a step further.
The basketball team explored earlier, for example, added large screens for the sales team that measure daily, monthly, and quarterly goals. While a simple tweak leveraging their new data, the adjustment led to friendly competition in the sales department that grows sales even more.
9. Businesses Gain a Competitive Advantage
To be fair, only current data has value, so companies working with data that has a short shelf-life won’t see a large advantage from that. However, they can develop a competitive advantage by consistently delivering solid customer experiences as well as pivoting quickly to meet the changing needs of customers and business conditions.
9 Challenges of Digital Transformation for Small Businesses
Around 70 percent of digital transformation initiatives fail, according to McKinsey. Understanding why this happens is the key to avoiding these pitfalls as your business makes the transition.
1. Agility
Nearly 70 percent of business leaders say agility is one of their most important initiatives per CIO Insight, but it’s a bit of a double-edged sword. Moving to digital processes makes organizations more agile, yet it takes some agility to shift.
2. Understanding the Complex Software and Technology
Again, the average enterprise-level business leverages 900 applications. Ideally, companies that modernize will do away with some applications as part of the transformation process, but not all do because finding options that work together rather than layering is hard. Roughly 40 percent invest in new technologies but don’t integrate them into their existing systems, according to Avanade research.
3. Slow Adoption of New Tools & Processes
People problems rank supreme when it comes to digital transformation challenges. For example, 46 percent of respondents to Avanade’s survey said finding and training people to lead their digital transformation was their biggest challenge. Similarly, McKinsey’s study found lack of employee engagement and inadequate management support to be two of the most common reasons why initiatives fail. Be sure to shore up your training and support prior to kicking off any initiatives.
4. Continuous Evolution of Customer Needs
Simply put, what customers wanted yesterday is not what they want today, nor is it what they’ll necessarily want tomorrow. For example, demographics that were not digital natives have historically eschewed digital channels. During the pandemic, even some of the most resistant groups learned how to use chatbots and place orders online. Now that they can use them, their preferences have shifted, and they want to be able to use them—especially if long waits for a live agent are the alternative. Keep a pulse on your customers, follow trends, and watch the data to see when you need to pivot.
5. Lack of a Comprehensive Digital Transformation Strategy
In all, 96 percent of businesses in Avanade’s poll say they have a digital transformation strategy, yet 43 percent report having transformation fatigue. This suggests that, although businesses may have some kind of a plan, it’s not detailed enough to streamline the transition. You’ll want to map yours out thoroughly to avoid this pitfall.
6. Insufficient IT Resources, Skills, and Management
As mentioned earlier, finding talent is a serious challenge for businesses. Over 38 percent say insufficient in-house skills are holding them back, per Avanade research. If you’re planning to go digital, keep this in mind while hiring and select those with more digital experience and/or a strong willingness to learn.
7. Digital Security Concerns
Security incidents are rising as more data is moved online. Risks like hacking, phishing, and ransomware are understandably worrisome, considering a single data breach now costs a typical company $4.24 million per IBM’s annual report. Thankfully, the right solutions include their own security and can be more secure than older and non-digital methods.
8. Budget Constraints
Although savings is a major motivator for businesses to begin the digital transformation, finding the cash to invest in technology and people can be a challenge. It’s important to remember that you don’t need to transition all at once and, sometimes, all it takes is a small investment in the right processes to get the ball rolling.
9. Continuous Changes in Technology
Technology changes in the blink of an eye. Just over a third of businesses are struggling to modernize legacy systems and processes, per Avanade research. Not only are companies wrestling with finding solutions that allow for data migration or interoperability, but they’re worried about future-proofing their new solutions, too. For this reason, it’s helpful to choose technology partners and solutions that have been in business for some time, as they’ll understand your needs better and are more likely to build systems in a way that extends their lifespan.
Digital Business Models for Sustainable Growth
Small businesses must embrace innovative digital business models to stay ahead. The adoption of such models not only facilitates a seamless digital transformation journey but also harnesses the full potential of digital tools and strategies. By strategically implementing digital solutions, businesses can redefine their core operations, driving substantial improvements in efficiency and customer satisfaction. The journey towards digital maturity involves more than just adopting new technologies; it requires a fundamental shift in business practices, enabling organizations to tap into new markets and create value in ways previously unimaginable. Through a great digital transformation program, small businesses can develop numerous advantages by making digital adoption central to their business development. This approach not only helps in streamlining business operations but also in aligning digital transformation goals with the overall business strategy, ensuring that the transition to digital is both purposeful and impactful. By focusing on the right digital tools and innovative digital marketing techniques, small businesses can achieve digital excellence, turning potential digital challenges into opportunities for growth and innovation.
Streamline Your Digital Transformation with Invoice Factoring
Invoice factoring provides instant payment on your B2B invoices, so you’re not stuck waiting 30 or more days for customers to pay and can invest in the tools, technology, and people necessary to streamline your digital transformation. Charter Capital also provides digital invoice processing to make invoicing and tracking a breeze. Request a rate quote to get started.
Hybrid and remote work are here to stay. Although there’s been a significant drop in total remote workers since the peak of the pandemic, more than a quarter of full-time employees are completely remote, and a whopping 92 percent work remotely at least one day a week, according to Zippia research.
This is great news for many reasons. People who work remotely at least some of the time are generally happier and more productive, while companies that allow remote work tend to have lower turnover per SmallBizGenius.
However, with each person off in their own corner of the world, employees can easily become disconnected or cut off from the team. Today, only 36 percent of employees report feeling engaged in their work and workplace, according to Gallup polls.
Why it’s Important to Keep Remote Employees Engaged
Most definitions of employee engagement mention things like a connection to the workplace, psychological investment, enthusiasm, and willingness to contribute to the company’s success.
It makes sense, then, that engaged employees are 4.7 times more likely to do something good for the company even if it’s not expected of them and 3.5 times more likely to stay late at work when something needs to be done, according to a Temkin Group study.
Furthermore, businesses with highly engaged employees have 41 percent less absenteeism and 17 percent greater productivity per Gallup. They deliver significantly better customer experiences than their competitors too, the Temkin study notes.
These factors have a major impact on the bottom line. Revenue growth is 2.5 times higher when employees are highly engaged too, according to Bain & Company. Profitability is 21 percent higher as well, Gallup research shows.
Statistics abound. Keeping your employees engaged is good for business.
8 Ways to Boost Employee Engagement and Improve the Remote Work Experience
Despite the benefits of remote work, it presents challenges for employee engagement. There are no impromptu meetings at the water cooler or lunches together in the breakroom. You can’t just pass by someone’s desk and tell by the look on their face that they’re having a rough go of things and need a one-on-one. Even still, there are many things you can do to boost engagement in a remote work environment.
1. Equip Your Employees with the Proper Tools at Home
If your team is struggling with equipment or establishing a proper work setup at home, their productivity and morale are going to tank. You may even be required to procure equipment or reimburse for work-related expenses depending on local legislation. A few things employers routinely address include:
Computer and monitor
Software
Tech support
Printer
Scanner
Cell phone
Headset
Internet connection
2. Invest in Development
Researchers recently polled more than 18,000 employees to find out what drives both employee engagement and employee disengagement. Interestingly, the top ten factors in disengagement repeatedly reference the word “manager.” This is not mirrored on the list of top engagement factors. In other words, management alone can break an experience, but it’s not enough on its own to make one.
One of the biggest killers of engagement was not feeling valued by one’s manager, according to the Custom Insight survey. While there are certainly many factors that go into feeling valued, such as treating employees with respect and remembering to celebrate wins, investing in your team is huge. When you provide your team, not just with a strong onboarding but ongoing development, you’re telling them that you believe in them and want to keep them around.
3. Ask for Employee Feedback
Asking for employee feedback falls squarely in the “feeling valued” box mentioned above. Most companies perform annual surveys or request feedback during employee reviews, but you may want to do it more frequently when your team is remote because contact tends to be reduced.
Experiment with a mix of options. For example, you may want to give employees the option to reply anonymously to some surveys or address specific initiatives and projects in different surveys. You can also ask for direct feedback during one-on-ones.
4. Listen to Your Workforce
Asking for feedback means nothing if it isn’t paired with action. If your employees pinpoint issues in their surveys or report concerns to you directly, be prepared to follow up on them. You may also want to institute a virtual open-door policy, so the team knows that they can come to you about their concerns without fear of repercussions.
5. Utilize Employee Journey Mapping
Have you ever heard the parable about the blind men and the elephant? It goes something like this: Three blind men come across an elephant for the first time and reach out to touch it. The first grabs the tail and describes the elephant as being snake-like. The second touches the ear and says it’s like a fan. The third grabs a leg and says it’s more like a tree. None of them is wrong. It’s all about perspective. Your employee experience is the same way.
A newly onboarded employee may feel competent and empowered, while someone who’s been with the company a few years might feel neglected and ignored. Employee surveys don’t account for these differences. They tend to lump everyone together even though they’re at a different stage with the company and therefore are experiencing the organization differently.
Employee journey mapping addresses this and can show you where your organization is lacking, so you can shore up weak areas in the employee experience and meet the needs of your team better.
6. Improve Internal Communication
Employee communication is about more than endless meetings and email chains. Make sure your team is set up with the right communication tools, including an instant messaging platform and project management tools. You may also want to look into creating an internal company newsletter. These things help the team come together over common goals and provide more avenues for solidifying company culture.
7. Foster Social Interactions
Positive social interactions boost morale and bring the team together. A few virtual activities to consider include:
Charity events and fundraising
Virtual office parties, watercooler chats, and coffee breaks
Formal peer-to-peer recognition programs
Dedicated time during meetings to share positive personal news
Non-work channels on company chat applications
Employee Resource Groups (ERGs)
Peer buddy groups and mentorships
8. Invest in Employee Wellness
Now more than ever, employers are acutely aware that employees need mental and emotional wellness programs in addition to physical health benefits that are traditionally offered. If you offer your team health insurance, your insurance provider may already offer things like access to health and fitness programs, counseling, or virtual healthcare. In these cases, you can simply promote the programs already available to your team rather than paying for additional options.
If these perks aren’t already available, find out if there are ways to offer them at little or no cost to your team. You can also adopt new company policies related to sick time, vacation, and leave to ensure employees can see to their personal needs and feel more focused at work.
Invest in Your Employee Experience with Help from Invoice Factoring
Some initiatives to improve your employee experience don’t cost anything to implement. However, if cash flow issues or slow-paying clients are preventing you from moving forward with larger initiatives, invoice factoring can provide you with the cash to kick them off. Unlike loans, which are paid back with interest over a period of time, factoring is similar to getting a cash advance on your unpaid B2B invoices. Your clients pay off the balance when they pay their invoices. To learn more or get started, request a complimentary rate quote from Charter Capital.
