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Crisis Concept. Money Flow in Black Hole extreme closeup
Payroll is a very important issue for a company/business. If the business is running short on funds, the payroll finances must be arranged to pay for its employees. Small business owners can have a contract with payroll companies to ease their administrative work in payroll or certain expenses can also be delayed to make for wiggle room in payroll. Train your staff how to process payroll in time. If after reviewing your payroll schedule, the system is still not working, there is likely a large cash flow problem in the business.

SOLUTIONS FOR CASH FLOW AND PAYROLL PROBLEMS

Small business owners can make payroll on time and manage their cash flow problems by implementing these cash elevating policies.

Short-Term Business Loans

To fulfill an urgent requirement of payroll funding, you can borrow money or take small loans to fund the payrolls. If the amount is small, the money can be paid back using small business lines of credit.

Collect Late Payments and Outstanding Receivables

Many customers delay their payments. In a small business, if you are running short on income, quickly generate invoices and send them to customers immediately. This will minimize the delayed payments by the customers to some extent.

Offer them discounts if the payment is made within a given time frame before the deadline.

Factor Your Invoices

  • Always encourage your clients to pay quickly
  • Use Invoice Factoring for typical slow paying customers
  • Be Persistent with Notices
  • Retain Legal Counsel
  • Link with other small business owners in the trade union
  • Utilize the services of a collection agency

 Decrease Business Expenses

Keep a strict check and balance on the expenses going on in your business. Do not sign any reimbursement application before double checking the purpose, date, and invoice number.

Eradicate unnecessary expenses in your business. If your advertising is costing you an arm and a leg, then consider using social media, which is normally free, and directly interact with your potential customers.

Liquidate High-Value Assets

Liquidating high-value assets can be done as a last resort but, still, it provides an option for making payroll in time. You can sell a valuable asset of your business which is not being used or is not a part of the capital investment. You can sell a car to manage payroll funding on time. Though this loss cannot be compensated, as you most likely do not get the asset back, it will eradicate the chances of inconvenience between you and your employees.

Small Business Line of Credit

The small business line of credit works like a credit card. You simply pay interest on your present due balance, not on the entire credit line stretched out before you. When you pay back your balance, the sum of the existing credit rises and becomes accessible to borrow again in the future.

Outsourcing Contractors

Small business owners have to manage a lot of business operations. Especially, at the start of business, many small business owners hire more staff than is actually required. Extra payroll funding has a negative effect on small business income and growth. 

Small business frequently make the mistake of hiring a new employee for each new task that arises instead of dividing it among existing staff. This creates a huge issue of payroll funding for the staff if the business runs slow.

Before hiring another team member, work on other options like outsourcing contractors. Find automated ways for various tasks to reduce the burden on your team.

Refinance & Consolidate

Debts in a small business often result in cash flow problems. Small business owners can refinance their business by consolidating the debt they have taken. They will have to pay back the debts on a monthly basis and they are given the relaxation of years to pay back the small amount every month. Consolidating can also save time and money currently spent on managing a complicated cash flow management process.


CONCLUSION

Small business owners can use many strategies to sort out their cash flow problems. You can manage and cut back on expenses, encourage your clients to pay on time, or consolidate your debts. In the best interest of your business, consider the above tactics to manage your cash flow problems. 

Check out America's Best Bookkeepers
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.

 

 

Payroll, Office Binder on Wooden Desk. On the table colored pencils, pen, notebook paper
Payroll is a very important issue for a company/business. If the business is running short on funds, the payroll finances must be arranged to pay for its employees. Payroll problems often occur when you hire employees on temporary contracts for a project.

Payroll funding permits your company to finance invoices and assets so that it can make payroll.

To fulfill an urgent requirement of payroll funding, you can borrow money or take small loans to fund the payrolls. If the amount is small, the money can be paid using small business lines of credit.

Payroll errors are harmful to a company’s reputation.

5 COMMON PAYROLL PROBLEMS AND THEIR SOLUTION

 

  1. HIRING OUT PERFORMS INCOMES

When a small company is performing outclass, generating revenues and net profit is increasing, the business owner often hires more resources earlier than actually needed. The small business owner feels the pressure of their workload and quickly responds to the demand for more work by employing new people. It often happens in small businesses when the revenue will take time to build to an extent to keep up with more payroll but an employee is given the job anyway. The small business owner must utilize the current working staff on the payroll to perform better by coming up with smart strategies.

If you want to grow your payroll before the revenue builds up, your business must have cash savings to cover the increase in payroll. Otherwise, the business can dissolve. You can use cash from the last business season to overcome payroll problems.

 

  1. TEMPORARY STAFF IS NEEDED

If your business wins a project and you need more staff to accomplish the task before the deadline, you have to increase the payroll of your company. A temporary project also increases the expenses in a company. This is a common scenario in construction companies, landscapers, and designers. Construction businesses often outsource their employees depending upon the complexity of projects. This process is predictable and calculable. You must know when to hire new staff, how to manage their payroll funding, when the revenue will build up, and how to overcome expenses until your revenue is generated. Prepare in advance and plan out the finances and other issues. You can take money out of the last season of your business or borrow money for the payroll funding until the next season yields revenue.

 

  1. OVER STAFFING

Small business owners have to manage a lot of business operations. Especially, at the start of business, many small business owners hire more employees than are actually required. Extra payroll funding has a negative effect on small business income and growth. 

Small business owners can often have a bad habit of hiring new staff for any new task that arises instead of dividing it among it’s existing staff. This creates a huge issue of payroll funding for the staff if the business runs slow.

Before hiring another team member, work on other options like outsourcing contractors, finding automated ways for various tasks to reduce burden on the team, and reorganizing teams.

 

  1. DELAYED PAYMENTS BY THE CUSTOMERS OR DISCOUNTS GIVEN TO CUSTOMERS

Many customers delay their payments. In a small business, if you are running short on income, quickly generate invoices and send them to customers immediately. This will minimize the delayed payments by your customers, to some extent.

Offer them discounts if the payment is made within a given time frame before the deadline. Always encourage your clients to pay quickly.

Use Invoice Factoring for typical slow paying customers.

 

  1. MISCONSTRUING PAYROLL TAXES

Carefully calculate the payroll taxes. Otherwise, IRS will send notice to you that you owe your employees money.

A taxpayer can request the IRS to make a negotiation on payroll taxes for a small business and settle payroll taxes lesser than the full amount.

 

CONCLUSION

Payroll problems are a common issue in small business setups. If not properly planned, the credibility of your business becomes uncertain due to payroll funding problems. Small business owners should strategically manage their payroll funding by avoiding common mistakes.

Check out America's Best Bookkeepers
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.

Concept of no money

Timely inform employees:

Most entrepreneurs that are struggling are well aware of whether or not they will be able to make payrolls. But, due to embarrassment, they don’t inform their employees that they are not able to pay them. Experts recommend that, as soon as an employer comes to know that they cannot pay their employees, inform them immediately. Don’t handle the situation emotionally, be honest, and realistic. “What I have found in my consulting business is that, more often than not, small business owners are embarrassed and worried about results, so they typically handle [the situation] emotionally,” says Donald Todrin, founder of the Northhampton, MA-based Second Wind Consultants. “This usually means that they don’t tell anybody until 10 minutes before they’re supposed to get their checks.”

Once you have decided to notify employees, start from the upper management. From the seasoned employees to the new joiners. The top-down approach is adopted because the severity of the situation lessens when the news of no payments circulate from upper management to the lowest level.

Search resources for finances:

An employer is liable to many state and federal taxes if they are unable to pay employees. As soon as you come to know that you cannot make payroll, take a decisive and desperate action. Jump into the situation swiftly. Think of all the methods from where you can get the funds. These resources may be carrying out huge layoffs, swift solutions of the business modification for rapid liquidity, or, worse, closing entirely. If all of these plans fail, the owner is liable to penalties and fines. These fines are equal to fifty percent of the annual earnings. 

“Beg, borrow, or sell whatever you need in order to come up with the funds,” says Rod Jorgensen, the director of counseling at the Nevada Small Business Development Center. However, in light of recent restrictions on bank lending, gaining rapid access to cash via traditional bank loans, lines of credit, and mortgages is a thing of the past.

Utilization of the available resources:

Another method to pay employees without making payroll is to utilize all of the available resources. Theses available resources are the inventory and pending receivables. These are the immediate sources of funds. Liquidate the inventory or ask vendors to pay you receivables immediately on discount. You will be able to earn capital immediately and can pay employees.

Avoid confounding the payroll:

Some employers tend to a fraction instead of nothing at all. This method of staggering payments may not be applicable and practical in all states due to legal issues. Once you cannot pay employees, their efficiency decreases and they are likely to flee as soon as getting new employment. 

The other method recommended is reserving some of your most trusted employees the promise that you will pay them as soon as possible. Ask them if you can hold their paychecks for a few days in order to pay other employees timely. If they agree, you will be able to make on-time payments. 

Pay for labor immediately:

The U.S. Department of Labor states that all daily waged employees should be paid the full wage along with their overtime. Otherwise, the penalties and fines will be imposed according to the Fair Labor Standards Act.

If you unable to make payroll, manage to pay labor and daily waged workforce to avoid lawsuits.

Streamline your business:

Once you are able to come out of the crisis and have paid your employees, restructure your business. Necessary modifications are needed immediately to avoid this happening again. Make changes in the business model. Decrease your overhead expenses and restructure your operations. 

Employees are the asset of your business and you are cashing their hard work and honesty. Paychecks are the only source of livelihood and income for them. So, even at the time of crisis, you should be able to manage to pay off their checks so that they can survive. But, in return, they should be empathetic with you. This message should be conveyed to all of your employees.

Conclusion:

Not being able to pay your employees is a dire situation for a business owner but options like selling assets, borrowing money, or delaying some payments, may allow you to pay them, even in the worst of situations.

Check out America's Best Bookkeepers
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.