It’s been your dream to own a business for as long as you can remember. You worked hard to take it from idea to reality, and over the past few years, you’ve grown enough to bring on a few employees. Everything was great until you started to feel like you were in a little over your head. Along with your new employees, you also paid to upgrade your equipment, move to a fancier location, and increase the orders from your favorite vendors. What you didn’t expect was the cash flow problems that soon followed.
Now, you’re balancing the books in anticipation of payday and you’ve suddenly realized that you weren’t going to make it. There just isn’t enough money in the bank to cover the wages that you owe your employees. What should you do?
The important thing is not to panic. It doesn’t feel great to realize that you’re going to fall short of making payroll. After all, your employees trusted you to hold up your end of the bargain when they decided to join your company. Still, it doesn’t need to be end of the world.
The Commercial Finance Group has helped hundreds of businesses across the country find relief from their cash flow problems through receivables financing and other custom lending solutions. We’ve heard from these business owners personally and they tell us that without our lending options, they may not have been able to keep their doors open.
Keep reading to learn more about what to do if you can’t make payroll and how receivables financing from The Commercial Finance Group in Atlanta can help.
It’s Not Just You: Cash Flow Is A Problem For Many Businesses
The very first thing to do is take a deep breath. Although you’re in a very serious situation, you’re not alone. Only around 50 percent of new small businesses survive beyond their fifth anniversary, and even those that hurdle this milestone often experience cash flow problems at least once. Payroll is the biggest expense for many small businesses, so it should come as no surprise that this is one area where entrepreneurs often feel the pinch. It’s how you deal with this problem that will set you apart from the pack, and determine which half of the business survival statistic you eventually join. After you’ve calmed down a little bit, use the tips below to guide your next steps.
What To Do When Funds Fall Short
- Notify Your Employees ASAP – If you pay close attention to your business finances (and why wouldn’t you?) it’s likely that you’ll know you’re going to come up short days or even weeks before it happens. It’s absolutely imperative that you respect your employees enough to tell them that it’s likely payroll won’t be dispersed as expected. Some of your employees may be living paycheck to paycheck, and you owe it to them to provide ample warning that they may have to investigate other financial resources this week/month. If you have a plan for how you’re going to deal with the payroll shortage, share it with your employees. It’s the only way that you can hope they’ll stick with you for the ride.
- Seek Alternative Resources – Your next step after figuring out that you’ll be unable to make payroll is to figure out exactly how much you need to cover the gap. Line up all your deposits and debits and determine the exact amount that will allow your payroll checks and tax payments to clear. Then, it’s time to explore the alternative resources that can help you get it.
- Personal Funds: This includes personal savings accounts, credit cards, selling physical assets, and asking your family and friends to invest the money. It’s a big slice of humble pie, and you should be absolutely sure before you allow personal funds to be mixed up in the business. But for relatively small amounts and short term needs, personal funds are one viable option.
- Delay Payments To Suppliers: Do you have good relationships with your suppliers? Have you always paid on time in the past? If so, you may be able to trade on their goodwill and earn an extension on your bills. Doing so may free up enough working capital to make payroll.
- Explore Receivables Financing: If you’ve discovered that unpaid invoices are at the root of your cash flow problems, receivables financing could be the perfect solution. The Commercial Finance Group can create a plan through which you can sell your unpaid invoices to us at a slight discount. You get a large percentage of your money as well as the added relief of allowing someone else to collect the debt. Receivables financing has helped many businesses make payroll and we can help you too.
- Cut Pay: If you think that your inability to make payroll is going to be a long-term problem, you’ll have to consider the option of cutting employee wages. This is why it’s so important to be upfront with your workers as soon as you realize there’s a cash flow problem. They need time to know that potential wage cuts are coming, why they’re happening, and to decide if they want to pursue other employment.
- Prepare For The Future – Hopefully, one or more of the options for seeking alternative funds will allow you to make payroll. This time. But what will you do if this happens again? As soon as you’ve signed the last check, it’s time to do a deep dive into your company’s finances. You must analyze your operations and expenses to determine what caused the shortfall and make serious changes so that you can avoid them in the future.
The Commercial Finance Group is here to be your partner in creating a successful future. We offer a full menu of customized lending solutions that are designed to help you bridge the gap between cash flow problems and long-term success. We’ve helped hundreds of businesses across the country, and we’d be happy to offer solutions for you as well. Please don’t hesitate to contact us! We have offices in the Southeast (Atlanta) and the West Coast (Burbank), but we can and will help companies located all over the country.
