Any business venture can run into financial difficulties and be unable to maintain commitments and meet financial obligations. Economic changes, overreliance on credit, and unexpected expenses can contribute to the owner being unable to afford the operating costs, pay bills, and pay the employees. When coming upon challenging times, business owners should understand whether internal or external factors caused the financial difficulties and assess whether cutbacks can be made.
If I were an employer facing difficult financial times, I would attempt to resolve the situation without having to lay off employees. I would ensure that at least 10% of free cash flow in each quarter is deposited into a savings account that can be accessed to ensure the company can pay for operating costs, such as payroll, property rent, and taxes (Curtis, 2020). I would consider cutting capital expenditures unless investment in new properties or equipment is instrumental in preventing the business from shutting down or laying off employees. Furthermore, certain business assets can be liquidated; however, it is important to assess all assets and dispose of those that do not add value to the company (Curtis, 2020). Alternatively, bank and peer-to-peer loans can be considered (Kagan, 2020). Overall, it is critical to ensure that the company always has access to cash and can pay for its day-to-day expenses.
Nevertheless, it should be acknowledged that in some cases laying off employees cannot be avoided. A review of staff should be performed to determine whether workers are productive and secure the further employment of the most efficient employees (Curtis, 2020). Inefficient workers that do not contribute to the business’s development should be laid off. However, the human resources department of the company should prevent ethical concerns from arising. Thus, employees should be dismissed based only on their performance and the set termination criteria. The dismissed personnel should be awarded with severance packages and given a letter of recommendation to ease future employment. In summary, any business struggling to maintain commitments and meet financial obligations should consider several options that will allow it to stay afloat, including accessing savings, taking out loans, liquifying assets, and laying off inefficient employees.
References
Curtis, G. (2020). 5 ways to keep your business going in hard times. Investopedia. Web.
Kagan, J. (2020). Peer-to-peer lending: The lowdown. Investopedia. Web.