No business situation is more do-or-die than being unable to make payroll. However, if you ever find yourself short on money to pay your staff, there’s no need to panic. A number of solutions are available that can get you and your company out of a sticky situation.
Keep Communication Open with Employees
If you can’t make payroll, don’t let embarrassment or pride get in the way of doing the right thing. Tell your employees as soon as you know there will be an issue and apologise for the inconvenience. Hold a meeting and tell everyone about the bad news. Prepare to take questions. Don’t do it over email.
If someone grumbles about the Fair Work Act, inform them the ombudsman gives employers a reasonable time frame to rectify the situation. If the worst does occur, give up your own paycheque and put it towards the employees’ pay.
There are several strategies at your disposal to increase cash quickly and get wages back into your staff’s accounts.
- Factoring: If you have any outstanding invoices and the client can’t pay right away, sell their invoice to a factor, which is a great way to get up to 90% of the value of the invoice immediately. The debt-factoring company then follows up the invoice and you get cash in your pocket ASAP to pay your most pressing bills
- Line of credit: If you have a line of credit – or a business credit card – with your bank, now is the time to use that money to get your staff paid
- Borrow from family or friends: If pay day is approaching, it’s unlikely you’ll have the time to get a traditional loan or line of credit, but family and friends are more likely to sympathise with your position. Just make sure to create a formal document for repayments – the same as you would with any bank
- Liquidate surplus inventory: If you have some inventory to spare, you can call a liquidator to sell it and put cash in your hands quickly. You won’t turn a big profit, but you’ll take care of the most pressing problem
If you’re short on cash come pay day, you’re not completely out of options. As long as you’re honest and keep a cool head, you can make it through.
This information is factual only and is not intended to to imply any recommendation about any financial products or constitute advice. You are responsible for consulting with your own professional tax advisors and financial advisors concerning specific tax or financial circumstances for your business. Intuit disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your business finance. If you have questions regarding accounting issues specifically related to your industry or your business circumstances, you should consult with your own professional tax advisor, accountant, attorney, industry expert or professional association.
Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.