Making Payroll When Cash is Tight
By: Robyn Barrett
For new and small businesses, the slightest hold-up in revenue can cause operations to grind to a halt. Something as simple as making payroll can become a huge challenge when revenue is tied up in unpaid client invoices. Overcoming these financial obstacles may be easier than you realize, however. It all comes down to choosing a working capital solution that actually works for your business.
Handling Low Cash Reserves
New businesses typically start out with capital reserves to handle overhead costs until sales start coming in. However, even if sales are through the roof, your business may not have a healthy cash flow. Payment delays or other issues can lock up capital, requiring your business to rely on cash reserves to meet day-to-day needs. But when cash reserves are depleted and revenue is still locked up in unpaid invoices, how do you make payroll? Many companies turn to short-term loans, but they often lead to more headaches down the road. Plus, short-term loans don’t resolve the issues that created the capital shortfall in the first place. So the same problem will likely come up again. What’s more, if a company encounters unexpected expenses or other financial difficulties, the additional debt of the loan could actually make matters worse. In short, borrowing money while waiting for revenue can quickly turn into a vicious cycle that could land a business in bankruptcy in a very short period of time.
Boosting Cash Flow & Making Payroll
Instead of using loans and compounding expenses with debt, many savvy business owners turn to Accounts Receivable (A/R) Financing instead. A/R Financing is a simple method by which unpaid receivables are quickly converted to cash. Instead of waiting on staggered customer payment schedules, businesses can access revenue within 24 hours. That makes concerns about making payroll and meeting other financial obligations a thing of the past. In fact, many businesses use A/R Financing to build up cash reserves so they can focus on growing and making more sales, rather than worrying about whether there is enough capital to cover overhead expenses.
Oxford Commercial Finance is a leading provider of A/R Financing solutions for businesses in a wide range of industries nationwide. Whether you are just starting out as an entrepreneur or ready to expand your business, our team of experts can help you learn how this flexible working capital solution can help you supplement cash flow and grow your business without saddling your company with debt.