Key Learning

  • Make the most of excess working capital 
  • Protect your cashflow
  • Know what's best for you and your business 
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Hiring can be an exciting step for growth, but comes with its own costs. Here, Ben Stephenson, managing director and head of invoice finance & asset-based lending at Lloyds Bank Commercial Banking, explains how businesses can ensure they’re financially equipped to make their recruitment plans a success.

Newly-released figures from the Office for National Statistics painted a positive picture of the UK’s employment landscape. Between July and September, the UK employment rate was 0.4 percentage points higher than a year earlier.

The results of the latest Lloyds Bank Business Barometer mirror this finding, with businesses in a number of regions planning to increase their staff levels over the coming year

Often, the decision to hire is a response to a rise in demand for a firm’s goods or services. While recruitment plays a crucial role as part of a growth strategy, businesses should also be mindful of the costs that it can bring.

In addition to a longer payroll, businesses may need to invest in marketing to help fill vacant roles, pay for recruiters to identify the right candidates, or purchase training for new staff taking on specialist roles.

It can also take some time for new employees to hit their stride in their new roles, meaning firms will need to ensure they have adequate cashflow to fund day-to-day trading until they begin to see a return on their investment.

To address factors like this, it’s essential that firms ensure they have the finances they’ll need before making a new hire.

Make the most of excess working capital

One way companies can support their recruitment ambitions is by freeing-up the cash that is invested in working capital – the amount of money tied-up in the day-to-day costs of doing business.

From Lloyds Bank’s own research, we know that UK businesses have nearly £600bn tied-up in excess working capital – funds that could otherwise be used to support their recruitment and growth plans.

Excess working capital can be freed-up by shortening the cash conversion cycle – the amount of time it takes to turn assets, including stock or outstanding invoices, into cash.

Fortunately, there are a range of financial tools that can help to do just this.

Invoice finance, for example, allows businesses to access up to 90% of the value of an unpaid invoice, often within 24 hours. Similarly, asset-based lending enables firms to access funds locked-up in a variety of assets such as stock.

Indeed, Invoice finance is particularly well-suited to businesses where the decision to hire is driven by sales growth as the more invoices a business issues, the more value they can unlock.

Protect your cashflow on the big purchases

Bringing on new staff can also require purchasing new equipment, such as vehicles or IT equipment. In these cases, businesses could benefit from using tools such as asset finance.

Asset finance helps businesses protect their cashflow by avoiding the need to make a significant outlay upfront, spreading the cost of a new asset over an agreed period of time – often the lifetime of the asset.

Identify the option best suited to you

Ultimately, having the right tools in place can support firms’ ability to make timely investments for growth while maintaining financial headroom and enabling them to capitalise on additional opportunities.

At Lloyds Bank we’ve committed to lend firms across the country up to £18bn in 2019 to support their plans for growth, including recruitment efforts – just one part of our plan to help Britain prosper.

Hiring new employees can help businesses scale, boost their competitive edge and capitalise on new opportunities. With the right plan in place, and support at hand, firms can ensure they’re financially prepared to put their recruitment plans into action.

Contributed by Ben Stephenson
Ashleigh Smith
Article by Ashleigh Smith
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