What is the one thing that most business owners are afraid they’re going to run out of? Cash, right? But in spite of the stress that this can create, there is probably nothing that has as much emotion surrounding it as Payroll.
Face it. There is nothing more important to you – or your employees – than payroll. Some employees check their bank account every payday to assure that they got paid. When a company runs into Cash Flow issues, you can put off paying your suppliers. You might put off some loan payments. You can even put off your rent payment for a while. But you can’t delay payroll.
There is an emotional component to Cash Flow problems in a business. There is added stress. Your employees are depending on you. These are the people that you work with day in, day out. They depend on you to pay them, just as you depend on them to come to work.
Your feelings are involved in different ways:
- If you don’t pay them on time, will they come back to work tomorrow?
- You’re embarrassed that you don’t have enough cash to cover their payroll.
- This is just a temporary turn of events, but you’re concerned about it happening again.
- It has become your top priority, because there isn’t anything more important than paying your people.
What are the first things you need to do?
- Calculate how much money you’re going to need to cover your payroll and your tax payments.
- Determine how much money you have in your bank. Taking your current bank balance and subtract all the checks you’ve written that haven’t cleared.
- Look at your bills to see what else you need to pay this week.
- Review your AR to see what cash you will get in the next two weeks. Can you get it sooner?
How do you fill the gap?
- If you have a line of credit, call your banker for a short term overadvance.
- Take an advance from a credit card – at no interest.
- Call your best customer and ask them if they can pay an invoice or two early.
But the best approach is to put together a 13 Week Cash Flow Forecast to help you. That way, you’ll have more time to adjust when you see that shortage coming.
Latest posts by Larry Chester (see all)
- Training the Next Generation – Part 2 - June 29, 2019
- VIDEO BLOG!!How To Take Your Business To The Next Level With a Fractional CFO - June 26, 2019
- VIDEO BLOG!!My Business is Doing Fine. Why do I need a Fractional CFO? - June 25, 2019