Can’t Make Payroll? Try these 7 things!
Making payroll is essential and extremely important to every business and their employees. Sometimes unexpected expenses or decreased cashflow can hinder the ability to have enough cash in the bank to make payroll. Not paying your employees in a timely manner not only creates anger and frustration, but a late paycheck could violate the Fair Labor Standards Act and add additional penalties to the problem.
If you are fast approaching payday and don’t have enough cash in the bank to make payroll, here are some things you can do to help meet your need:
Collect on Accounts Receivable
If you have any customers that are past due, reach out to them and ask about settling their accounts. This is a quick way to generate cashflow without impacting any other area of your business. Do pay attention to if you have any previous agreements in place for your customers to pay further out and if so, discuss this with them prior to payment. Another great solution is to offer small discounts to customers that are not past due to incentivize them to pay early.
Extend Your Accounts Payable
Asking your vendors to grant you a longer term of repayment is a great way to increase cashflow in your business. If you have always made payments on time, a longer term or even an extension on payment might not be a big deal as long as you have a plan to catch up. Make sure that if you go this route, you have a surefire plan to make the payment on time according to your vendors expectations.
Sell Surplus Inventory
If you have surplus inventory and selling it won’t cause problems for your company, contacting a company that can quickly liquidate it will increase cashflow as well. Also look at eBay and Amazon to see if you can sell it yourself and the price points. Carefully calculate if doing this will not cause problems in the future and if it will help you reach the total amount you need to in order to meet payroll.
Increase Your Line of Credit
Every business should have a line of credit with enough room to always cover a full month of payroll. If you do not have a line of credit or enough on the line of credit, now is the time to consider either getting or increasing your limit on your line of credit. This process always includes collateral as well as a “health check” of your business to determine if you can repay the line of credit.
Get a Small Business Loan
Getting a small business loan can sometimes take a longer amount of time, however some smaller business lenders will offer immediate funding. Make sure you have your paperwork and financials ready to go. A business needs to meet certain financial requirements, along with its owner, to qualify for a small business loan.
Ask for a Loan from Friends and/or Family
While asking a friend or family for a loan can strain a relationship, doing so can give you the cashflow you need faster than a line of credit or small business loan. Make sure that both parties have an understanding of how the loan will be repaid and a clear expectation of when.
Use a Business Credit Card
Some business credit cards allow business owners to take a cash advance, but this can cost a company. Cash advances usually have a high upfront fee with a high interest rate, so it is best to use this as a last resort.
Each solution and the problems that may come out of using that solution are individual to each company. Take the time to review each decision and the implications it will have on your company in the future before moving in that direction. One solution may be better than another, depending on the type of company.
HR Ledger can help.
Through our payroll system, we can schedule, automatically archive and keep your payroll records for you..
This is already included in your payroll agreement with HR Ledger and is no additional cost. Please call Malcolm or Scott today at 800-451-1136.