Meeting payroll really comes down to one factor: Do you have the necessary funds to pay your employees? Sound payroll management takes proper planning and proactivity. If you’re unable to meet payroll, you’ve probably been paying your rent, suppliers and other expenses with your payroll tax dollars. This is undoubtedly a reactive measure. The consequences of unplanned reactions are harsh, and realistically, you need the help of an experienced advisor.
Accounting isn’t the fix; payroll management is. That’s a practice of planning ahead. If you’re sweating payroll now, there are immediate measures to take that may help you recover, but this reactive approach is a far less effective option.
Proactive Tips To Prevent Payroll Administration Problems
Reactive payroll is a last resort, and a recipe for potential trouble. Take the following proactive steps to ensure that you meet payroll consistently:
1. Payroll is usually predictable and can be forecasted for several months. You must know what your finances look like down the line. If you forecast your future revenues and expenses (payroll included), you have a much better idea as to whether any issues are likely to occur.
2. Understand what affects your ability to meet payroll in the first place. Making payroll isn’t just about how much money is in the bank; it’s about how you manage your money. An inability to meet payroll likely means that you’re mismanaging funds in other areas of the business. Perhaps you don’t have enough marketing to bring in new clients, or you may be employing too many team members. It’s also common for retailers to struggle to make payroll because of poor inventory management. This doesn’t necessarily mean you will go out of business, but you do need advice from a professional to help identify where the issue is and make changes.
Payroll Management Tips To Stay Afloat
If you fear that you may not meet your small business payroll in the coming months, there are immediate steps you should take:
3. If you’ve reached a bleak financial situation, drastic cost- and cash-cutting measures must be addressed sooner rather than later. Trimming your staff, reducing hours and inventory and stopping any purchasing and hiring are all options to explore. But, these actions are likely to affect morale. You may lose your best employees, and your best customers might also be at risk. While these are unfortunate measures, they are your last resort and may help you stave off the risks of bankruptcy.
4. You must identify which area of your business to focus on first when faced with payroll management problems. Issues of this magnitude typically stem from a basic flaw in a business model. By fixing this weakness, you shore up your ability to produce a consistent net cash flow and greatly reduce the risk of missing payroll in the future.
Your Best Source For Proper Payroll Management Planning
There are few small business owners with the time, experience or expertise to properly plan to make payroll consistently. Realistically, you need this final tip:
4.5. Seeking professional help is always your best option. Proper payroll management is a time-intensive task, and as a small business owner, you probably don’t have that time to spare. If you’re concerned about meeting payroll, you should seek professional help to identify the real issues and make necessary changes. If you don’t determine the root causes, you’re not able to eliminate the ensuing stress.
If you outsource your payroll responsibilities, it’s important to partner with someone who is willing and able to gain an intimate understanding of your business and provide personal, one-on-one attention. Contacting a call center and speaking to someone new each time is not effective. In order to identify problems and make changes, you must consult with someone who knows your business inside and out.
If you find yourself unable to meet payroll, it’s important to take immediate action to address the issue. More important, though, you must do what you can to avoid getting to that point in the first place. The key – as in all aspects of your business – is being a proactive owner.