Every business has some type of Financial Technology (“FinTech”) integrated into its systems. It can be as simple as online banking, or as sophisticated as online order taking and fulfillment, and everything in between. Because technology moves at such a rapid pace and there is always something new out there, it’s easy to get caught up in looking for the latest and greatest to help streamline systems and make life easier. But you don’t need “high tech” to reap the benefits of FinTech.
Take that “simple” online banking for example. What may seem basic and mundane is actually a powerful cash management tool, offering a straightforward way to assist you in making strategic business decisions as you scale your business and grow your revenues. You can take advantage of how easy it is to open a new account, make transfers and see real-time balances. Here is an example.
One of the biggest financial challenges of a growing business is adding team members. You need them to grow your services, but how can you confidently make the decision that now is the right time? What if you hire them and find out you can’t support them long term? Where is the money going to come from? Take that stress away by paying the new team member for two to three months before you hire them. Here’s how.
First, calculate the total new payroll you want to add, let’s say $1,000 per month. Divide that by your average revenue per month. For this example, our revenue is $20,000 per month — $1,000 divided by $20,000 is 5%.
Second, open a new business bank account and name it “Test Payroll.”
Third, allocate 5% of monthly revenue into the new account for three months. This serves as a “stress test” on your current business financials, without spending an additional dime. If you find that you can allocate the 5% without a problem, it’s a green light to hire. If on the other hand you find you can’t pay current expenses on the remaining 95%, you still have the money on hand to cover, and you can adjust your plan as necessary.
This is just one example of using FinTech strategically to make good business decisions, and it’s as simple as some basic math and your bank account.