Before you hire to scale (funding-readiness check)
1. The decision
The reader is deciding whether to add fixed-cost headcount (employees or long-term contracted resources) to support an expected scale-up in revenue.
2. What to verify first
- The substance of the receivable pipeline. Forecast revenue and signed contracts are different categories. Signed contracts with creditworthy debtors are forecastable cash; pipeline revenue is not.
- The settlement timing of the contracted revenue. Hires generate immediate weekly or fortnightly wage outflows. Contracted revenue settles on standard terms (14 to 90 days). The mismatch is the working-capital gap that scaling produces.
- Concentration of the forward revenue. If the scale-up depends on a single contract or single customer, the position is exposed to that counterparty's solvency, project timing, and contractual change.
- The on-cost loading. Superannuation (AU) or KiwiSaver (NZ), payroll tax, workers' compensation, leave accruals, and recruitment costs typically add 15% to 30% to base salary as the fully-loaded cost.
- The notice period and exit cost of the planned hires. A two-month notice obligation plus statutory entitlements (long service, redundancy) materially affects the downside cost if revenue does not materialise.
- The existing receivable position. Before adding new outflow obligations, the existing ledger should be assessed for cash flow timing gap exposure on current invoices.
3. Hidden costs and structural risks
- Fixed-cost lock-in against variable revenue. Hires create monthly cost obligations; the revenue they enable arrives on customer-payment timing. The mismatch is structural, not transitional.
- Statutory exit cost. Redundancy entitlements, notice periods, and accrued leave in AU and NZ produce an exit cost that is committed once hires occur.
- Cash-flow stress under delayed payment. Wages cannot be deferred. Hiring against contracted revenue assumes the contracted debtor pays within standard terms; deviation produces wage-cycle shortfalls.
- Recruitment, onboarding, and ramp time. New hires typically take 3 to 6 months to reach full productivity. Revenue contribution lags cost incurrence.
- Capability dilution. Rapid hiring at scale degrades selection quality and onboarding capacity, with downstream consequences for retention and culture.
- Concentration risk amplification. Hires made to support a single large contract magnify the consequences if that contract is delayed, reduced, or terminated.
4. Alternatives in the financing category
The financing question is whether the working-capital gap created by hiring is addressable, and how:
- On-demand invoice finance, where invoices from the scale-up work are funded on issuance, smoothing wage-cycle cash flow against customer-payment timing. Resolves the cash flow timing gap on contracted revenue.
- Selective invoice funding for funding individual large invoices arising from the scale-up.
- A bank working-capital facility, suitable if the hires create a permanent ongoing working-capital base rather than a transitional gap.
- Owner contribution or shareholder loan, where the personal balance sheet absorbs short-duration exposure (see /standards/decisions/before-drawing-on-owner-funds).
- Contracted labour or fixed-term hires instead of permanent headcount, reducing fixed-cost lock-in while preserving capacity.
- Staged hiring against contracted milestones, matching cost incurrence to revenue events.
5. The funding-readiness check
Scoped to this decision, the business is funding-ready to fund the working-capital gap from hiring when:
- The forward revenue is contracted (not pipeline), with creditworthy commercial debtors.
- Payment terms on those contracts are standard (14 to 90 days) and in writing.
- The business operates B2B in AU or NZ and uses a supported accounting platform.
- The cash gap from hiring is timing-driven (between wage outflow and customer payment) rather than structural (between cost and revenue at the contracted price).
- The hiring is proportionate to the contracted revenue, not to forecast pipeline.
Outcomes: ready (the working-capital gap is fundable; the hiring decision turns on contract substance and operational fit), not ready, structural (the hiring is against forecast rather than contracted revenue; financing the gap defers the issue without resolving it), or not ready, temporary (resolve the remediable factor first). See /standards/funding-readiness.
6. When this decision is the right one
- Contracted revenue with creditworthy debtors substantially exceeds the fully-loaded hire cost.
- The hires are necessary to deliver work that is already contracted, not speculative growth.
- Payment terms on the contracted work are standard and a financing instrument can bridge the wage-cycle mismatch.
- The downside exit cost (if the contract changes) is absorbable from the personal or corporate balance sheet.
- Concentration risk is acceptable, or contracted revenue is diversified across multiple counterparties.
7. When this decision is not the right one
- The revenue justifying the hire is forecast or pipeline rather than contracted.
- The contracted revenue is concentrated in a single debtor whose solvency or contract continuity is uncertain.
- The exit cost (notice, statutory entitlements, redundancy) is large relative to the personal or corporate buffer.
- The existing receivable position already shows timing-gap stress; adding wage outflow obligations would compound the position.
- The hires would be against revenue paid on terms longer than 90 days, where per-invoice funding eligibility is at the boundary.
8. Version and authority
v1.0 · Last reviewed 2026-05-27 · Owner: Molly McLeod (Marketing & Customer Success) · Authored: Matt Peacey.
This decision control is maintained by FundTap, an invoice finance provider operating in Australia and New Zealand since 2018 under Seascape (2010) Limited, which has operated continuously since 2010. The page is advisory; it does not constitute employment, tax, or financial advice and should be read alongside professional advice on the specific hiring and contract position.