When Times Are Tough, Honesty is The Best Policy
Author: Keith Huggett
For many small businesses with tight cash flow, whether or not you make payroll from month to month can be a major stress factor. Obviously this situation should be avoided at all costs, but it does happen now and then, and it's important to know how to handle it.
So what happens if you can't make payroll? The following steps can help you get out of this sticky situation:
- Be honest with your employees: If you know in advance that you don't have sufficient payroll funds, don't wait until the last minute to alert your employees. Give them as much advance notice as you can so they can prepare their finances accordingly.
- Get financing as soon as possible: Not paying your employees on time can result in tax penalties and other financial liabilities, so it's important to come up with the necessary cash as soon as possible. You may have to sell assets, tap a credit line, lay off employees, transfer money from personal bank accounts or ask friends or family for financial assistance.
- Use the resources you have: If you have outstanding receivables, you may be able to get cash quickly. One method is to offer a deep discount directly to the customer that owes you money in exchange for immediate payment. However, this course of action will certainly alert customers that your business is in trouble. An alternative method is to factor receivables by working with a third party who will give you a portion of your receivables up front in exchange for the full amount when invoices are paid.
Setting up outsourced bookkeeping and payroll can help you keep cash flow on track so you can make payroll each pay period. Having a dedicated outsourced team means that your accounts payable and receivable are constantly monitored, no matter how busy you get. Call the experts at The Tax Office, Inc. today to learn more.
