It has repeatedly been said that employees are a company’s most important asset. As Sir Richard Branson, the English business magnate and founder of Virgin Group, stated, “Clients do not come first. Employees come first. If you take care of your employees, they will take care of the clients.” Taking care of employees requires paying them fairly and on time. So, it makes sense that you never want to be in a situation where you can’t make your payroll.
Why Making Your Payroll Matters
One survey indicated that 78% of American workers live paycheck to paycheck. So, without a timely paycheck, those workers could not afford to pay their bills and thus support themselves and their loved ones. A Mercer study on employee sentiment found that employee pay was the number one factor in worker satisfaction. A significant impact of payroll is morale. If payroll isn’t made regularly, employees could question the integrity and financial stability of the company. Their work quantity and quality could suffer. But what happens when you can’t make your payroll?
What Happens When You Can’t Make Your Payroll?
Paying employees on time is required by the Fair Labor Standards Act. Any failure to pay employees according to the schedule promised them violates labor laws. Violators are subject to financial penalties. Employees can sue for compensation, and the company could face civil penalties, court-ordered damages, and legal defense fees. Frustrated employees could stop working, impairing the company’s operations. And not making a payroll could result in a badly damaged brand image.
What Can You Do if You Can’t Make Your Payroll?
Here’s what to do if it looks like you can’t make your payroll:
- Find every way possible to increase revenues, including motivating and incentivizing your sales team and providing promotional incentives for customers. Elevate your marketing program effectiveness.
- Evaluate your accounts receivable and accounts payable. See if you can get accounts receivable paid as quickly as possible. See if you can get an extension on your accounts payable because paying late fees will be less harmful than not paying employees.
- Assess your employees. Make sure that the employees you have are worth keeping and that they are providing the return on your payroll investment. If necessary, make cuts.
- Consider asset liquidation. Salable assets can include raw materials, manufacturing supplies, existing inventory, office equipment, technology, and machinery or vehicles.
- Seek financing assistance including getting a short-term loan, invoice factoring, and a line of credit.
Payroll Management Tips
To avoid the calamitous problem that you can’t make your payroll, use these tips. First, carefully set a budget that includes all payroll expenses. Second, set and keep a regular payroll schedule. Third, clear payroll policies should be created and communicated. Fourth, keep thorough payroll records and make sure that data is entered accurately. Fifth, consider using a payroll service that will make it easier and more effective to handle all payroll functions.
Choose an Expert Payroll Service
Choose an expert payroll service, Palmetto Payroll, to assist you with your payroll system. We have offices in Columbia and Charleston, serving over 300 business owners statewide. We offer tailored solutions to save you time and money so you can thrive and grow, including payroll, tax depositing and filing, management reporting, Human Resource Services, and timekeeping services.
