The success and stability of your company can be tied to your ability to make payroll on time. If you are late or struggle with this obligation, you signal to your employees, your clients and the public that your business could be suffering dire financial circumstances. Rather than risk your employees' morale and your clients' trust, as well as being fined by the IRS for not paying your staff on time, you should consider your options for improving your company's cash flow. You can make your payroll on time and stabilize your business by using these cash-raising strategies.
1) Collect Late Payments and Outstanding Receivables
When your cash flow problems stem from late payments and outstanding receivables, it is crucial that you collect on these delinquent debts. Your clients may be unwilling to give you the money they owe you quickly. You should make it worth their while by offering them a discount on their current bill or settling the debt for the outstanding principle. These incentives can compel people who owe you money to pay their delinquent obligations.
2) Take out a Short-Term Business Loan
If your debtors are unable to pay their invoices, you can raise the cash you need by taking out a short-term business loan. A short-term loan can help you pay your employees without putting you into significant debt to a bank. You can pay it off in a year or less and avoid losing employees because of your inability to pay them on time. If you have the credit and collateral to take out a short-term loan, this option could solve your immediate cash flow needs.
3) Liquidate High-Value Assets
Liquidating your high-value assets can also help you get the money you to need to make your payroll. Selling assets like stocks, real estate, vehicles, office equipment and any other possession that you can survive without right now can be an option if you want to avoid taking out a loan or cannot collect outstanding debts from your clients. Because you often cannot recoup these assets after you sell them, however, you may use this strategy as a last resort if you would rather keep these items.
4) Factor Your Invoices
One of the most viable options to you as a small business owner would be to factor your invoices. When you utilize factoring, you do not take on another debt, nor do you risk your business' credit. A factor lender can instead check the credit worthiness of your clients and advance you the cash for those invoices.
Factoring also proves to be easy and convenient. In fact, factoring differs from a bank loan because:
- The factor application can be done entirely online
- Applications can be approved in a day or less
- You get the money you need in a few days
- Factoring does not require long-term commitment like bank loans
Banks can take days to approve you and put stipulations on how you can use your cash. Factoring is often more convenient and faster than taking out a bank loan.
5) Lower Your Operating Expenses
If you consistently miss payroll because of your high operating expenses, you can avoid this dilemma by cutting back on your business' budget. Rather than spending a lot of money on dazzling advertising, for example, you should downgrade your ads or use more affordable options like marketing through a social networking page for your company. When you cut back on your expenses, you will have more money to pay your workers on time.
Making your payroll is vital to keeping your employees happy and loyal to your company. You can avoid losing workers, being fined by the IRS and signaling to the outside world that your business is in trouble by using these cash flow remedies.