What is a General Security Agreement?

A General Security Agreement (GSA) is a document recording a security provided by a debtor company to its creditor over a specific group of assets or over all assets of the business. The GSA records the terms which include a right of the creditor to register their interest on the Personal Property Securities Register (PPSR) so that there is a public record of that financial interest in the assets of the debtor company.

We always recommend to directors/shareholders investing moneys into their business on start-up that they attend to completing the appropriate loan documentation (between company and individual) and a General Security Agreement recording the terms. It is important that this GSA is registered on the PPSR. It is also important that the registration is maintained and updated every five years to preserve the position as secured creditor.

Priority of Securities

The registration on the PPSR is an important step and “perfects” the security interest. Perfection of the security interest and the timing of that perfection establishes the order of priority of secured parties who have an interest in the company assets.

The main exception to the priority rule is the Personal Money Security Interest (PMSI) which is where a supplier of goods or equipment takes a security over the goods supplied (but not yet paid). For example, a hire purchase agreement over a refrigerator or a loan by a Finance Company secured over a motor vehicle (a serial numbered good). A PMSI creditor has “super” priority for the recovery of their unpaid goods and/or equipment.

The first to register on the PPSR will usually have priority in the event of insolvency – unless there has been a Deed of subordination between secured parties changing the priority or if the security is not valid.

Under a GSA, a debtor has obligations to the secured creditor to pay amounts owing to the secured party when due, to perform obligations under any agreement, not to allow another party to take security in the same assets without consent, or not to change control of the company without consent.

An important right under a GSA, is for a secured creditor following a default by the debtor, to appoint a Receiver, who then takes control and takes steps to pay the secured creditor.

It is common for banks when they advance moneys to a company that they do this by way of a GSA.

Where GSA’s go wrong

To maintain priority, the GSA needs to be registered immediately on execution of the GSA.

A financing statement has a life of 5 years and then falls off the register. It must be renewed before it lapses, or priority is lost;

The collateral description and accuracy with the registration of the security on the PPSR is important. If there are material discrepancies the security can be invalid.

It is important to register on the PPSR. It is the difference between having some right of recovery and running the risk of losing it all if the debtor company fails leaving a shortfall to creditors.

It is common in New Zealand for the directors and shareholders of small companies to be the same people and many are also employees of the company – executive directors.  Whether this is in the form of a family owned business or a just a small to medium sized enterprise made up of unrelated individuals this involvement on all levels can create difficulties.

The advantage of such a set up is that the individuals are motivated to make the business work and be profitable.

The downside is that the closed nature of the board can leave gaps in the knowledge and experience held by the directors and their closeness to the business can lead to subjective decision making.

Depending on the numbers on the board, this can also lead to a stalemate position if there is a difference of opinion on matters requiring board approval.

There are two other types of directors that can be brought into the board to help address these issues, non-executive directors and independent directors.

Non-executive directors vs Independent directors

Whilst both can address the lack of knowledge and experience, a non-executive director may be representing a shareholder and, therefore, may not act without some bias.

An independent director will generally have no links with the company, other than sitting on the board, and have no affiliation to any of the other directors or shareholders.

Case Study

A liquidation that we have been conducting involves a company with two directors with the shares held by entities associated with each of the directors.  One director was an executive director, employed by the company. Two further non-executive directors were appointed to the board – one nominated by each of the other directors.

The board functioned properly, and in unity, until the company faced financial issues. 

When the issues were identified, one director made a proposal to restructure the company’s business in an effort to remedy the problems. The restructure proposal was not accepted by the other executive director and, when it went to a vote, the non-executive directors voted with their appointer so there were two in favour and two against – stalemate.

As a consequence, the company continued to trade for a period and left all four directors with a potential liability for breaches of their duties as director.

The closely aligned shareholder interests did not want to change the boardroom dynamic by resigning as directors, or voting against their appointors interests and/or personal views.  In the end the directors settled with the liquidator. 

A truly independent director, with no affiliation to the other directors or the shareholding parties, could have looked at the restructure proposal in an objective way.

Conclusion

There is no way to know what decision an independent director might have made in the liquidation referred to above but at least a decision would have been made, and action taken accordingly, rather than having the company in limbo.

If you would like more information on appointment of directors and directors’ duties, please contact one of the team at McDonald Vague.

With financial year end, one of the considerations fresh in the minds of business owners and their advisors is the decision regarding appropriate directors’ remuneration.

In a previous article we reviewed the case of Madsen-Ries and Vance v Petera [2015] NZHC 538. In this article, we consider an issue on appeal by the liquidators of Petranz Limited (“the company”) as to whether salaries paid by the company to the directors were fair to the company when they were paid (Madsen-Ries v Petera [2016] NZCA 103). This article will also cover where creditor considerations fit in with such decision making, and the appropriate remedies for creditors if things go wrong.

Background

Mr and Mrs Petera were the sole directors and shareholders of the company, which carried on business between 2002 and 2009 as a cartage contractor. Mr Petera drove one of the company’s trucks, and Mrs Petera worked on administrative tasks.

During this time, the company made various non-business related payments that the Court deemed shareholder drawings, which caused their shareholder current accounts to be overdrawn. However, regarding salaries, in contrast to journalising director salaries at year end, the company paid the Peteras regular fixed amounts between October 2007 and May 2008. During this period the salaries were declared and PAYE paid to the IRD.

In the High Court, the liquidators of the company sued the Peteras for:

- Compensation for breaches of various directors’ duties,

- Repayment of overdrawn shareholder current accounts,

- Repayment of directors’ salaries they argued were unfair to the company at the time they were paid.

In addition to the repayment of the Peteras’ shareholder current accounts, the liquidators claimed a total of $453,003.33 for breach of director’s duties, including $132,255.09 for creditor claims and $321,647.64 for liquidators’ costs up to and including the trial. At the time of liquidation, the company owed creditors $132,555.33.

The High Court, considered the extent of the liquidators’ claim, and stated that their approach to this type of litigation was “[93] …neither cost effective nor proportionate” to the claim involved, and went against the intentions of the Companies Act 1993 (“the Act”).

Justice Lang found that the language and intent of sections 300 and 301 of the Act narrowed the issues to:
- The amount of compensation to the company that should be paid by the Peteras for reckless trading for actual loss, and
- the amount of personal liability for failure to keep proper accounting records.

Breach of Directors’ Duties

Justice Lang found the Peteras had breached various director’s duties under the Act: s 131 (to act in good faith and in the best interest of the company), s 135 (not to allow the company to be operated in a manner likely to create a risk of serious loss to creditors), s 136 (not to permit the company to incur debts unless they objectively believe the company will be able to repay those debts), and s 137 (to exercise the reasonable care, diligence and skill that a reasonable director would in the same circumstances).

For their breach of directors’ duties, Justice Lang ordered the Peteras to repay the company $64,708, being the losses suffered by the Commissioner of Inland Revenue from the time he determined that they should have stopped trading (31 July 2006).

The Court of Appeal approved of the decision by Justice Lang, to order payment of $64,708 as appropriate compensation to the company for breach of duty not to trade recklessly (s 135 of the Act). The amount determined as compensation also effectively limited the liquidators’ further claims under this cause of action.

Directors’ Salaries: S 161 of the Companies Act

The parties agreed that the directors had failed to comply with the procedures in s 161 of the Companies Act 1993 (“the Act”). The payments were not authorised by the board of directors (s 161(1), not recorded in the company’s interests register (s 161(2)), and finally the directors had not produced a certificate that the payments were fair to the company at the time they were made (s 161(4)).

Under s 161(5) the directors would be personally liable to repay their salaries unless they could show the payments were fair to the company at the time they were made.

In the High Court Justice Lang determined the salary payments were fair to the company at the times they were made, and allowed the Peteras to retain their salaries on the basis that:
- “(the liquidators’ concerns) are answered to some extent by the fact that the company paid PAYE in respect of those payments. To that extent the debt owing to the Commissioner did not become larger during the period in which the payments were made” [50], and
- “the company gained full value from the work carried out” [51], and
- “the company was able to derive profit from Mr Petera’s work because it was able to charge customers for the driving duties he undertook on the company’s behalf” and “the company’s administrative needs were handled by Mrs Petera” [51].

Directors’ Salaries and Fairness

In the Court of Appeal, the liquidators argued that the requirements that the salary payments be fair to the company, reflected the directors’ fiduciary duty of good faith (s 131 of the Act), and that they owed a duty to consider the fairness of the payments in relation to their effect on creditors’ interests, especially given the poor financial situation of the company at the time. The liquidators argued that, from the date of insolvency, the directors should have stopped trading and stopped paying themselves a salary (which would have protected creditor interests by preserving the company’s assets such as they were at the time).

The Court of Appeal however disagreed, and stated:

“[16] The scheme of the Act is that creditors’ interests are a relevant consideration for directors where the directors authorise distributions and other transfers of benefit by a company to its shareholders. In those circumstances the Act uses the solvency test, not the concept of fairness, to protect creditor interests. Where directors are called upon to authorise transactions in which the interests of the company on the one hand, and its directors or shareholders on the other, may diverge (including the payment of their remuneration), the Act uses the concept of fairness. The issue for the directors in those circumstances is fairness as between directors and the company. When certifying fairness, including where required by s 161, directors do not need to consider creditor interests. Directors may nevertheless be liable to contribute to an insolvent company’s assets to reflect losses attributable to the payment of director remuneration and, in turn, a company’s failure to meet its obligations to creditors. Such liability could arise under s 301, by reference to a breach of the s 135 duty not to trade recklessly.”

Liquidators’ Application for Leave to Appeal

The liquidators then sought leave to appeal to the Supreme Court, which although it accepted “[4] that the interpretation of the phrase “fair to the company” in s 161 raises an arguable issue of general importance”, declined to hear the appeal.

The Supreme Court found that such an appeal would require the Court to consider both a legal argument and conduct its own assessment of whether the payments were fair to the company, which it would not normally do, being a matter of “[5] application rather than principle”.

The Supreme Court also noted its concern over proportionality, given the amount already awarded in the High Court, the low level of company debt and the large claim of the liquidators.

Lastly, given the poor financial situation of the Peteras, who were facing bankruptcy, a further award against them would likely have no practical effect.

Conclusion

Regarding director remuneration, there is a distinction between fairness to creditors and fairness to the company. The duty of fairness is owed by directors to the company and indirectly to creditors, whose interests are directly addressed through solvency provisions and the enforcement of directors’ duties such as the duty not to trade recklessly.

The intent of sections 300 and 301 of the Act is to compensate the company and creditors for actual losses, and any further amounts claimed, such as liquidation costs, must be reasonable and proportional to the debts owed by the company.

Although s 161 contains a means of clawback of directors’ salaries, to claim both under this heading and the reckless trading provisions would involve a duplication of claim, and such approach has been rejected by the Court.

Nevertheless, directors must still take care to follow the procedures set out in s 161, and ensure their salaries are fair to the company at the time the salaries are paid.

Finally, if salaries are being paid to directors whilst ordinary creditors are not being paid, the company’s future viability should be reviewed. McDonald Vague can assist with that process.

If your business supplies goods to customers on credit, your terms of trade should include clauses relating to the PPSR.  If your terms have PPSR provisions but you have not been registering those interests on the PPSR, you should start. 

Once you are granted a security interest, you can (and should) register that interest on the PPSR as soon as possible.  Registering your security interests on the PPSR is easy.  It only takes a few minutes and the registration process can be completed online.  The fee for registering your financing statement on the PPSR is $20.00.  Your financing statement lasts five years but it can be renewed, if you still need it when it comes up for renewal.

The main benefit of having your financing statement registered on the PPSR is that, if your customer goes into liquidation or has receivers appointed, your goods will not be available to the general body of unsecured creditors.  As a secured creditor, you can take back your goods (provided they have not yet been paid for) or, if your goods have been sold, you can trace into the proceeds of sale of your goods (when your goods are paid for by a third party).

If you don’t register your security interest on the PPSR and another creditor has been given and registered a General Security Agreement (“GSA”), the GSA holder will have priority over your goods.  We often deal with creditors who have registered their security interests on the PPSR too late, if at all, and have lost their priority in goods to other parties’ security interests. 

It’s a good idea to review your internal PPSR procedures on a regular basis.  If you think it’s time for a review or you want to discuss how you can use the PPSR to your best advantage, get in touch with the team at McDonald Vague.

If you're thinking about starting your own business, buying into a franchise can seem like a good option. Being part of a franchise means you will be part of an established brand with name recognition, group marketing strategies, and business plans.

The advantages that come with buying into a franchise come at a cost. In addition to the purchase price, you will have business set up costs, marketing fees, and training fees to pay. You will also have obligations to the franchisor to run your business in line with the franchisor’s brand, its image, and its processes.

Things to consider when buying into a franchise

When deciding whether to buy into a franchise, you will need to look at whether you have the technical skills, ability, and industry understanding to make the franchise work. You will also need to consider whether you have the ability to implement your own marketing strategy and business plan, which must align with the franchisor's brand and image – if you’re operating outside the terms of the franchise agreement, the franchisor may step in.

What will the business really cost

You also need to work out what the business is really going to cost you and how much it's going to make. Some franchise agreements require you to pay for ongoing marketing, training, and products. These additional costs really add up so it's important to conduct a business health check – and stress test it – as part of your due diligence. If your business is going through a bit of a tough patch, you may end up in a position where paying rent and franchise fees does not leave enough for your business to get by.

Get advice early on

If you are a franchisee and your business is in financial trouble, or it may be heading that way, it is important that you get advice early. Not only do you need to consider whether you are breaching your director’s duties by continuing to trade, you also need to consider the consequences of insolvency under the franchise agreement.

If you think the problem is the franchise fees and that a hive down of your business might be the easy answer, think again. It's unlikely to be that simple.  Most franchise agreements contain restraint of trade clauses that will stop you from leaving the franchise then immediately setting up in direct competition with the franchise.  Some franchisors hold the leases for the franchisee’s premises, which could allow the franchisor to put another franchisee in the premises.  Some franchisors hold the supply agreements with suppliers and act as a middle man in the supply chain.  Some franchise agreements allow the franchisor to step in if the franchisee becomes insolvent.  Most limit the franchisee’s ability to on-sell the franchise to a third party without the franchisor’s approval. 

Know what you are getting into

Buying into a franchise can be a great idea but it's really important to know what you're getting into.  If you’re starting out, your franchise isn’t going to make anywhere near what the established top performing franchisees are making.  It is important that you work out what the business is going to cost you to run and how much money it’s likely to make in both the short term and the long term.  Only then can you decide whether you can make it work.  Once you’re in, you need to monitor how your business is doing and whether you’re on track. 

If you're thinking about buying into a franchise or you’re worried about your existing franchise, give us a call.  We can help.  You can also head to read more helpful articles on our website.

No one is immune to being targeted by scammers. People from all walks of life, backgrounds and ages are vulnerable, and everyone must be constantly alert for fraudulent contact, says Auckland business advisory firm McDonald Vague.

“With this week (13-19 November) being Fraud Awareness Week, we want to remind Aucklanders of the dangers of scams and the need to be vigilant. We all receive junk emails, enticing online advertisements, letters offering a private purchase of shares for a low price, phone calls from people purporting to be people who they are not, and so on,” explains Peri Finnigan, director of McDonald Vague.

Ms Finnigan says that her firm is focussing on telling its clients about the need to be careful about business and financial scams. These are the scams that encourage the private purchase of shares and/or property, participation in an investment scheme or a manged fund, investing in a particular business proposal or paying fraudulent invoices.

“These proposals and communications tend to look very credible and, on the surface, perfectly viable. But of course they’re all designed to steal your money. Tax scams are also prevalent where you’re contacted by someone, either online or on the phone, by someone saying they’re from the Inland Revenue or a tax specialist. The IRD will not contact you in this way, nor will any genuine tax specialist.”

McDonald Vague has sent its clients a checklist that will help avoid investing in scams. It includes links to the Financial Markets Authority’s website so clients can check they’re using a registered New Zealand broker or investor, a link to check scam alerts and so on. The firm is also sending these clients a list of ways to help keep themselves safe, and what to do if they think they’ve been scammed.

Ms Finnigan concludes, “As business advisors, we’re also available to help ascertain whether a business proposal is worth considering. The usual advice is, however, if the offer or return seems too good to be true, it probably is!”

McDonald Vague Ltd is a member of NZ CA Limited. NZ CA is an association of independent chartered accountants located throughout New Zealand. NZ CA’s mission is to support its 28 member firms improve their business delivery to their valued clients.

Keeping yourself safe

It’s important to keep yourself safe from scams online. These include:

• - Always keep your anti-virus software and your operating systems up-to-date
• - Ensure your passwords are a mixture of letters (upper and lower case), numerals and symbols, and we don’t mean a password such as ‘Abc123!’
• - Don’t share passwords with anyone, including typing your password into an email
• - If you receive an email from someone you don’t know or a business that sounds odd, delete it immediately
• - Don’t click on links or open any files sent to you if you don’t know the sender, and
• - Use your common sense; if an offer or deal seems to be too good to be true, it usually is.

More information can be found at www.nzca.com.

On your business card, it says you’re the director of your company. But what does that actually mean?

Not all business owners understand that being a director comes with specific duties under the law. It’s important you understand these duties and expectations, because if your company gets into trouble, your personal finances could be put at risk. 

In this article we look at the director duties and responsibilities in NZ, and how you might be have some personal liability if your company becomes insolvent. 

Directors Responsibilities in NZ

The Companies Act 1993 lays out the responsibilities of directors, which are called “Director’s Duties.” We wrote an extensive article about director’s duties, which you can look to for more information. But the main responsibilities of the director are to:

• - act in a way that doesn’t contravene the Act or the company’s constitution.
• - manage the company in a responsible way, taking all practicable steps to ensure the company remains solvent or isn’t run in a way to risk substantial loss to creditors (called “reckless trading”). Directors owe duties to the company, its shareholders, and other parties who work with the company.
• - file obligations with the Companies Office.
• - ensure accounting records are kept.
• - act honestly, in the best interests of the company.
• - abide by a two-step solvency process at all times (called “The Solvency Test” - learn more about that here).

Risk of personal liability

If your company is declared insolvent or you do not fulfil your duties under the Companies Act 1993, you as the director can be held personally liable under the following circumstances:

• - you fail to complete a solvency certificate when required.
• - you fail to follow the correct procedure for authorising the relevant transaction.
• - at the time the certificate was signed, reasonable grounds for believing that the company would satisfy the solvency test did not exist.
• - between approving the transaction and executing it, the circumstances affecting the company’s ability to meet the solvency test have changed, but the distribution occurs anyway.

If you sign a solvency certificate knowing it is misleading or false, you are committing an offence, and are liable for a fine of up to $20,000, or you could go to prison for up to five years. Likewise, directors who vote for a distribution, but then don’t sign the certificate, are liable on conviction for a $5,000 fine. The directors can also be required to reimburse the company for the distribution paid if the transaction occurs within a specific period preceding liquidation.

The risk of personal liability are too great to take lightly. That’s why it’s important you understand all your duties as a director under the law, and if you’re worried about the solvency process, talk to the professional team at McDonald Vague. We can give you the best plan for managing your company through tough times.

You and your staff have worked hard to produce goods.  If you sell your goods on credit, no doubt, you eagerly await payment for those goods each month.  Did you know that you can take a positive, cheap, and effective step to protect your business and your goods while you’re waiting to receive payment?

The Personal Property Register (“PPSR”) is a publicly accessible, searchable database that allows secured creditors to notify the world that they have an interest in goods that are in the possession of someone else.  This interest is called a security interest.  Registering your security interest can be done online.  The document you register on the PPSR is called a financing statement.  Your financing statement notifies other parties that, if the debtor does not pay you the amount it owes or fails to perform its obligations to you, you have the right to take back your goods.

You can also search the PPSR online: 

- by a party’s name or company number, which will tell you who has registered security interests against that party and what goods have been secured.

- for specific goods by serial number, which will tell you whether another party has a registered security interest in that good.

PPSR searches cost $3.00 each.

The PPSR is a useful business tool.  Even though the PPSR has been used in New Zealand since 2002, we regularly deal with creditors who are not taking advantage of the PPSR.

If you want to discuss how you can use the PPSR to your best advantage, give the team at McDonald Vague a call.  We’ll help you get it right.

If you know your company is heading for trouble, you need a turnaround strategy. We’ve created a free checklist you can use for your business risk management.

This list will assess if your company needs to employ a turnaround strategy, and what areas you should be focusing on.

Place a tick beside any sentence that applies to you: 

Management structure

• - Are there governance and management standards in place?
• - Is the management structure appropriate for the size, type and complexity of the business?
• - Do the members of the management team understand their roles?
• - Is there a balance in participation, and balance of power?

Expertise

• - Is the management team aware of the forces affecting their industry/market?
• - Are your staff fulfilling the critical functions, sufficiently skilled?
• - Do they recognise the challenges facing the business?
• - Are the staff capable of a turnaround?

Decision making

• - Are the managers on the same page, and do they meet regularly?
• - Do the managers have a clear strategy/vision and is it appropriate?
• - Do the managers have high integrity and honesty?
• - Are decisions made in a way that is appropriate for the business?

Systems

• - Is the business plan appropriate for the size/type of business?
• - Is management financial information readily available?
• - Are the management information and key performance indicators adequate for the business?
• - Is accurate, meaningful management information produced on time?
• - Do you meet services levels expected?

Style

• - Are your staff open and cooperative in discussing and addressing the issues facing them?
• - Are your staff customer focused?

Succession planning

• - Is succession planning an issue for the business?
• - Can existing managers be relied on?
• - Have adequate plans been made for the future?

Commitment to the company

• - Is the management team committed to the company?
• - Do the managers have a stake in the business?
• - Are the managers good at leading and motivating their workforce?

Trading

• - Can you trade profitably?
• - Do you have support from secured creditors?
• - Are your secured creditors supporting your trade on strategy?
• - Will staff see the process through?
• - Would creditors defer or compound their debts?

Any boxes left unticked could be a problem for you. Add up the number of boxes you haven’t ticked and find your result below.

Less than 5: A healthy business

Congratulations, your business is low risk, and not in need of a turnaround strategy. While there are always areas you can improve, it looks as though things are running smoothly and you’re in no risk of insolvency.

Between 6-12: Time to get proactive

While you’re still trading and things don’t seem that bad, you’re not as risk-free as you’d like to believe. Don’t ignore these important signs – you need to get proactive about business risk management and work through these issues before they become bigger problems later on. Call McDonald Vague to talk about a treatment plan to get your business back on its feet. 

More than 12: Heading for trouble

Your business could be in danger and you need to act immediately. You need to talk to a qualified professional who will help you figure out your company's turnaround strategy. Call the friendly team at McDonald Vague today.

Growing your company is an extremely exciting time. However, you shouldn’t be jumping into a heavy growth phase without careful planning and consideration.

Growth involves risk, and if your business isn’t built on a solid foundation, it can crumble under the pressure of expansion.

Learn how to grow your business safely and with as little risk as possible:

Gathering Capital

Like everything else in the world, growing a company requires one essential resource – money. You need funds in order to execute your growth strategy. The most common way of obtaining the required capital is to take out a loan or line-of-credit, but before you do this, it’s important to carefully consider all options and financial ramifications.

There are many options available to business owners looking to grow. You may be able to obtain the required capital by “bootstrapping” – using your own operating revenue to expand. This will require frugal financing and an entrepreneurial mindset, but could be hugely beneficial if you can make it work as you won’t have debt to manage.

You can also attract investors to your company. For this, you will need an up-to-date business plan and a very clear idea of the path ahead. You also need to be prepared for your books to be scrutinised in detail.

If you can’t secure a loan through a bank, there are alternate lenders you can approach. If you are lending funds to your company personally then ensure you gain advice on registering a General Security Agreement to protect your investment.

All these options involve pros and cons, and may first require a period of consolidation to pay off previous debt. Talk over your options with a business professional to ensure you’re growing your business safely.

Get strategic

When growing your business safely, you need to be strategic about how and where you wish to grow. There are many different options available to you, and you should be carefully studying the market and your core competencies to figure out where you have the best chance of success with little risk.

Think about:

• - Opening new premises to capitalize on new geographic markets.
• - Expanding your current customer base through new product lines or additional funnels – such as an online store.
• - Adding additional revenue streams through complimentary products/services.
• - Expanding your current team with more expertise.

It can help to survey current or potential customers to get a solid idea for market needs, and carefully research the most cost effective ways of expanding your business safely.

Hiring new employees

Any growth activity is going to involve hiring new staff. However, growing your business safely means not jumping into recruitment without carefully assessing what – and who – you can afford.

Calculate the cost of a new hire – their salary package, benefits, recruitment costs, equipment and supplies, and training costs. Look at your projections and sales forecast and determine if the new hire is within your budget. Then, consider how much revenue a new hire will bring in, and weigh this against your previous calculation. Refer to the employee cost calculator at New Zealand SME Business network for an idea of the cost of a new hire. Consult with your accountant if you’re unsure or are in desperate need to find the funds for a new hire.

Don’t forget that you have other options, for example, you may be able to make up a skills shortage temporarily with freelancers, contract workers, interns, or other temporary workers.