How to explain the management if doent have a funds from the company to pay employees
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Answer:
nly half of new small businesses survive beyond their fifth anniversary. According to research provided by the American Bankruptcy Institute, 43,546 small businesses filed for bankruptcy protection in 2008. When events like this occur, it is not only business owners who are left holding the metaphorical bag.
Employees of said businesses not only lose their jobs, but are often left in the dust when it comes to receiving funds owned to them in bankruptcy court. Short of going belly up, many businesses go through periods when they become short on cash, leaving business owners in the unfortunate position of being unable to make payroll for a given period.
Instances such as this occur for a variety of reasons including low seasons in certain industries, absent receivables, and a down economy. However, one thing is clear - employees and payroll taxes must be paid by any means necessary. When it comes to entrepreneurs in this predicament, "They have to scramble - family, friends, savings - whatever they can do," says John Seelinger, a management counselor with the Orange County, California branch of SCORE.
Granted, this is one of the more dire situations that a small business can find itself in. But there is hope. When it comes to paying employees in a hurry, there are several options that should be considered, including family, hard money loans, lines of credit, and discounts on receivables. But, more importantly, the business should be restructured in a way that prevents episodes such as this from recurring. If you have ever been unable to pay your employees or desire to understand how to negate the risk of this occurrence in the future, read on to discover ways to prevent or rectify this unfortunate scenario.
How to Pay Employees When You Can't Make Payroll: Notify Your Employees
Most employers know in advance that they will be unable to make a given payroll. However, it's usually embarrassment or pride that prevents entrepreneurs from being honest with themselves about the situation, and honest with employees in turn. "What I have found in my consulting business is that, more often than not, small business owners are embarrassed and worried about results, so they typically handle [the situation] emotionally," says Donald Todrin, founder of the Northhampton, MA-based Second Wind Consultants. "This usually means that they don't tell anybody until 10 minutes before they're supposed to get their checks." The best thing that an employer can do is to notify their employees of the potential problem as soon as they're aware of it themselves.
Mike Turner founded the luxury real estate firm Front Street Brokers in Boise, ID in 2005. In early 2008 and in late 2009, due to downturns in the real estate market, he was unable to pay his employees with existing revenue. "I tried to be upfront with them about it," says Turner. "I said, 'We're running out of time, running out of money, and here's what I'm going to do." This gave his employees the time and freedom to look for new employment in the interim before he resorted to layoffs.
When it comes to informing your employees of impending danger early on, Todrin recommends disseminating the news via a top down approach. "There's a natural hierarchy of leaders or there are specific leaders depending on the size of your business, whether they're managers or the people with the longest longevity - the go to men and women that are in your business," says Todrin. "What I would highly recommend is that you gain their cooperation in advance of dealing with the entire population." Todin explains that doing this softens the blow for the other employees, and that the news will not be as harsh as if it were to come from upper management.
Explanation:
Answer:
nly half of new small businesses survive beyond their fifth anniversary. According to research provided by the American Bankruptcy Institute, 43,546 small businesses filed for bankruptcy protection in 2008. When events like this occur, it is not only business owners who are left holding the metaphorical bag.
Employees of said businesses not only lose their jobs, but are often left in the dust when it comes to receiving funds owned to them in bankruptcy court. Short of going belly up, many businesses go through periods when they become short on cash, leaving business owners in the unfortunate position of being unable to make payroll for a given period.
Instances such as this occur for a variety of reasons including low seasons in certain industries, absent receivables, and a down economy. However, one thing is clear - employees and payroll taxes must be paid by any means necessary. When it comes to entrepreneurs in this predicament, "They have to scramble - family, friends, savings - whatever they can do," says John Seelinger, a management counselor with the Orange County, California branch of SCORE.
Granted, this is one of the more dire situations that a small business can find itself in. But there is hope. When it comes to paying employees in a hurry, there are several options that should be considered, including family, hard money loans, lines of credit, and discounts on receivables. But, more importantly, the business should be restructured in a way that prevents episodes such as this from recurring. If you have ever been unable to pay your employees or desire to understand how to negate the risk of this occurrence in the future, read on to discover ways to prevent or rectify this unfortunate scenario.
How to Pay Employees When You Can't Make Payroll: Notify Your Employees
Most employers know in advance that they will be unable to make a given payroll. However, it's usually embarrassment or pride that prevents entrepreneurs from being honest with themselves about the situation, and honest with employees in turn. "What I have found in my consulting business is that, more often than not, small business owners are embarrassed and worried about results, so they typically handle [the situation] emotionally," says Donald Todrin, founder of the Northhampton, MA-based Second Wind Consultants. "This usually means that they don't tell anybody until 10 minutes before they're supposed to get their checks." The best thing that an employer can do is to notify their employees of the potential problem as soon as they're aware of it themselves.
Mike Turner founded the luxury real estate firm Front Street Brokers in Boise, ID in 2005. In early 2008 and in late 2009, due to downturns in the real estate market, he was unable to pay his employees with existing revenue. "I tried to be upfront with them about it," says Turner. "I said, 'We're running out of time, running out of money, and here's what I'm going to do." This gave his employees the time and freedom to look for new employment in the interim before he resorted to layoffs.