What Should You Do It You Can’t Make Payroll?
Owning a business is not easy, and it’s not for the faint of heart. As a small business owner, you run the risk of facing cash flow problems at some point in your life. It might be because of an unexpected expense or inability to collect the money a client owes you. When that happens, you may find yourself asking a question most small business owners have asked themselves one time or the other: What should you do if you can’t make payroll? Let’s take a close look at some of the options you have as a small business owner to help you make payroll.
Request Extensions
When you are struggling to make payroll, you have many different options available to you. One option is to request an extension on upcoming bills and payments. If you have a good track record with your supplier, requesting an extension on your payment may be no big deal and allows you to use the cash to pay your employees instead of a hefty bill.
Unfortunately, this option can only work for so long because the supplier will notice when payments are not being made or when you request an extension. It’s always best to be on good terms with your supplier and keep this option in your back pocket if necessary.
Sell Extra Inventory
If you can’t seem to make payroll, you might want to re-evaluate your inventory list. Extra inventory means that you can sell more products to your customers to increase cash flow. Although this is the best route to take, there is another option if you are having trouble selling inventory to customers.
Instead of letting extra inventory sit in a back room collecting dust, now might be the best time to contact a liquidator. Liquidating excess inventory can increase cash flow and allow you to make up for payroll expenses. One thing to remember is that you may not receive the same amount of money you would if you were to sell the same inventory to your customer; therefore, you must consider the pros and cons before reaching out to a liquidator.
Apply for a Business Loan
Small business loans are a great way to help increase cash flow and allow you to use the extra money to pay employees and much more. Before applying for a loan, it’s always best to ensure that you will receive the capital you need when you need it. Traditional loans can take weeks to months to hit your account. However, some companies get you the extra capital within 24-48 hours.
Cash Advance
Do you have a business credit card? If so, you might be able to take out a cash advance to make up for payroll expenses. Although a cash advance from your business credit card can be helpful, there may be hidden fees and extra costs such as high-interest rates that may not make it the best option for you.
Another issue that can arise is that grace periods are not typically offered on cash advances. Therefore, you would be accumulating interest as soon as you take out the cash you need; if you don’t have a strategy to begin payment as quickly as possible, the interest and other fees can become overwhelming and not make this option worth the added stress.
Ask Family and Friends
Having a supportive network of family and friends can be extremely helpful during these times. If you find that the traditional options will take too long or not be the best fit for you and your business, then you might want to ask a trusted family member or friend for the extra capital you need.
This type of loan should be treated like any other loan to avoid strain and stress on both parties involved and your relationship. To avoid these problems, it’s best to create a contract in which you outline when you will pay your friend or family member back and the amount of your payments. This will keep both parties responsible for holding up their end of the bargain without any added problems.
Not all of these options will work in every situation; therefore, you must understand how each will benefit or hurt your business’s finances in the long run. Once you understand these concepts, you can better choose the right option for you and your business.
The best way to avoid situations such as these is to plan. At Vision HR, we know that life can sometimes get the best of you, and all the preparation in the world can still leave you ill-prepared. Instead of getting by, contact us at Vision HR to help your Palm Coast business with all your payroll needs and avoid these situations from happening to you indefinitely.
