f You Miss One Payday You're Out Of Business

Your biggest business priority when you run out of cash is payroll. In business if you miss one payday, you are out of business. If you are not able to make a Friday payroll for your people, you will have to close the doors on Monday. If you can't make payroll on the 15th of the month, you must shut the doors on the 16th. Don't be fooled by thinking, "My people love me. They'll understand." No they won't. Try missing one payday and see how much they love you.

Making payroll becomes your key priority. You need to do a cash flow projection for the next three months, using projected income figures that are realistic, not hopeful, and be sure that you will be able to meet payroll.

If it doesn't look as though you will have enough income to make payroll you're going to have to reduce your payroll costs. Nobody enjoys doing this but it is essential to your survival.

As you think about the people who work for you, you will probably think of one or two people that you wish would quit. Perhaps they've been with you a long time and you have a strong sense of loyalty to them. Perhaps they have been made redundant by technology. Are you still employing a full-time bookkeeper now that computers have made the job possible to do in one quarter of the time? Do you still have someone answering the phones when most of the calls go through to an answering system anyway? Do you still have a vice-president of mimeographing locked away in the basement? If you've got anybody on payroll that you wish would make your life easier by quitting, you need to take action right away. Get them out of there!

If you're conflict averse it will probably occur to you that instead of firing people you should cut back everybody's hours. That may be a temporary solution if you are between orders and will need all of them in a month or two, but there's a real danger that you make everyone unhappy when you do that. It's better to let some people go and let them collect unemployment compensation for a while. Hopefully you'll be able to rehire them when business picks up. If you cut everyone's hours, you're just passing on your cash flow problem to your employees.

Here's a tip for you: consider how conflict averse you are. Some people love a good fight. Their idea of a fun evening is to go to bar and pick a fight with someone. If they are in the military, they want to be on the front lines where the action is. That's not me and perhaps it's not you either. If you're conflict averse, there's a high probability that you have failed to take the tough action that a businessperson in a cash flow crunch needs to have done.

Having terminated the people that you wish would have quit, consider the poor producers. Do you have salespeople that are having a tough time making their sales quota? Perhaps it's time to let them go and reassign your sales territories.

Posted in Accounting-Payroll