The Cash Flow Challenge and Payroll

Cash Flow

Payroll is one of the most significant expenses that can create cash flow issues for businesses that experience delayed payments.
Why? Because employees expect to be paid on time and should be paid on time.
If your business collects payments for services rendered up to 30, 60, or 90 days after the invoice date, you’ve likely struggled to have cash on hand when you need it. Consequently, you understand the struggle of finding solutions to pay for everyday business expenses, including payroll.
Why lucrative businesses sometimes can’t cover payroll
We have all grown up in a world where talking about money can be touchy. In fact, businesses often feel vulnerable sharing their experiences in managing cash flow even when it has nothing to do with financial diligence.
So here is the million-dollar question:
Could profitable businesses struggle with covering payroll? Yes — in fact, sometimes it’s because they’re doing so well!
They could be experiencing such rapid growth, taking in more clients than ever, and hiring new employees to meet that increasing demand for services that they may need funds to cover payroll short-term until revenue is collected. Sometimes they even have large contracts, with longer payment terms, mainly when dealing with government or insurance payouts which again can impact payroll.
Other times, it’s just due to the nature of the business. With delayed payments, companies sometimes have a lag between when employees get paid and payments come in. Or seasonality, at the beginning of a new semester or season, or between seasons.
The PAYRO Finance Solution
SDP has partnered with Payro to provide loans designed specifically for payroll. With Payro, you can get a quick line of credit to help you run payroll on time during those times when funds are tight and you are waiting for open invoices to get paid. Unlike traditional loans or other lending options, collateral is not required. The payroll loan is only available to use when running payroll.

How some companies use payroll funding solutions
Long ago, companies would have to get very creative to solve this payroll challenge, but today there are options. First of all, nobody wants to be in debt – especially ongoing – so today there are short term options to help with a quick fix.
One company, an established family owned nursing home that had recently expanded and opened a dialysis center. When the dialysis center started taking in new patients, they had to hire more staff to be able to take on the extra patients. They wouldn’t be seeing their first payment from insurance until 30-60 days later and in the meantime, needed a short term loan to cover payroll.
Due to COVID, another company that was an established, cash flow-positive Construction Expediting and Design firm had a large number of unpaid invoices, which left them temporarily short of $100,000 on the payroll. Fortunately, they did not need to turn to an expensive construction business line of credit. Instead, they were able to overcome their cash flow issue and pay their staff on time with a payroll funding loan.
Finally, a manufacturing company received an atypically large order, which forced them to allocate nearly all their manpower to fulfilling that order. The problem is, the order would not be paid for until it was delivered and inspected, a process which would take 30 days. Payro’s short-term payroll loan was the perfect solution for them.

The Bottom Line
These are extremely common scenarios that businesses may face. In some cases, businesses may need one-time payroll financing just to get over the hump, while others may need to utilize payroll financing on a more consistent basis. Either way, small business loans via payroll funding are great ways to keep staff paid consistently.
There are absolutely no fees to get your line of credit approved with Payro. Sign up today and have access to same-day payroll funding whenever you need it.
If your business requires short-term funding to operate efficiently, payroll financing may be the right solution for you. Visit today to see how we can help.

Content provided by Payro


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