Comments on: Companies NEED debt to pay payroll http://www.3princessesmomma.com/2008/10/companies-need-debt-to-pay-payroll/ One Opinionated Woman's Thoughts on Family, Finance, and Everything Else Tue, 09 Mar 2010 14:14:24 -0800 http://wordpress.org/?v=2.8.4 hourly 1 By: Momma http://www.3princessesmomma.com/2008/10/companies-need-debt-to-pay-payroll/comment-page-1/#comment-824 Momma Thu, 09 Oct 2008 18:15:01 +0000 http://www.3princessesmomma.com/?p=602#comment-824 I do see what you're saying, but I still don't think it's a good reason. I work for the moving industry. 80% of our business occurs between May 15th and September 15th. We still have suppliers, maintenance on properties, utilities, payroll and all of our other bills that we need to pay every single week just like any other company. This company has met its obligations for 42 years without any kind of debt ever. Even big companies need to plan ahead, not behind. I do see what you’re saying, but I still don’t think it’s a good reason. I work for the moving industry. 80% of our business occurs between May 15th and September 15th. We still have suppliers, maintenance on properties, utilities, payroll and all of our other bills that we need to pay every single week just like any other company. This company has met its obligations for 42 years without any kind of debt ever. Even big companies need to plan ahead, not behind.

]]> By: Frugal Wench http://www.3princessesmomma.com/2008/10/companies-need-debt-to-pay-payroll/comment-page-1/#comment-822 Frugal Wench Thu, 09 Oct 2008 16:34:54 +0000 http://www.3princessesmomma.com/?p=602#comment-822 Actually, it's the larger businesses who borrow the most. It's not about profit, it's about cash flow. Most of their equity is tied up in long term investments, such a securities and real estate. Most of the time, they can make payroll out of what they earn, but there are times when all they can manage to do is pay their creditors. Take Wal-Mart in Florida. Florida is a seasonal economic state, where the population drops by half during the summer months. During the summer, Wal-Mart may not actually make enough profit to keep operations going, keep their suppliers paid, AND make payroll. It's a matter of who gets paid first. Without paying utilities and suppliers, there will be no stores where employees can work. Therefore, if cash flow on payday isn't enough to cover payroll, but you know it's coming in in a couple of days, you simply borrow it short term. You know, if a company has 10 employees, that's one thing, but with thousands of employees, you have to have quite a lot of cash on hand to cover payroll. It's easy to tell 10 employees that you can't pay them for three days, because a big check needs to clear the bank, but not so easy to do that with the mega payroll big companies have. You'll hear of the Friday after Thanksgiving being called "Black Friday". That's because most retail businesses operate in the red through much of the year, borrowing short term until they can pay it back during the Christmas season. Without credit, they would have to close down. Actually, it’s the larger businesses who borrow the most. It’s not about profit, it’s about cash flow. Most of their equity is tied up in long term investments, such a securities and real estate. Most of the time, they can make payroll out of what they earn, but there are times when all they can manage to do is pay their creditors. Take Wal-Mart in Florida. Florida is a seasonal economic state, where the population drops by half during the summer months. During the summer, Wal-Mart may not actually make enough profit to keep operations going, keep their suppliers paid, AND make payroll. It’s a matter of who gets paid first. Without paying utilities and suppliers, there will be no stores where employees can work. Therefore, if cash flow on payday isn’t enough to cover payroll, but you know it’s coming in in a couple of days, you simply borrow it short term.

You know, if a company has 10 employees, that’s one thing, but with thousands of employees, you have to have quite a lot of cash on hand to cover payroll. It’s easy to tell 10 employees that you can’t pay them for three days, because a big check needs to clear the bank, but not so easy to do that with the mega payroll big companies have.

You’ll hear of the Friday after Thanksgiving being called “Black Friday”. That’s because most retail businesses operate in the red through much of the year, borrowing short term until they can pay it back during the Christmas season. Without credit, they would have to close down.

]]> By: L@spillingbuckets http://www.3princessesmomma.com/2008/10/companies-need-debt-to-pay-payroll/comment-page-1/#comment-815 L@spillingbuckets Wed, 08 Oct 2008 14:20:52 +0000 http://www.3princessesmomma.com/?p=602#comment-815 I could sort of see how this would happen when companies are VERY young and haven't had time to make a profit - but I hope that the huge majority of companies don't rely on debt to pay their employees or keep their lights on. That's not a business, it's a losing venture and as FBB said it isn't healthy. I could sort of see how this would happen when companies are VERY young and haven’t had time to make a profit – but I hope that the huge majority of companies don’t rely on debt to pay their employees or keep their lights on. That’s not a business, it’s a losing venture and as FBB said it isn’t healthy.

]]> By: FFB http://www.3princessesmomma.com/2008/10/companies-need-debt-to-pay-payroll/comment-page-1/#comment-814 FFB Wed, 08 Oct 2008 14:13:26 +0000 http://www.3princessesmomma.com/?p=602#comment-814 IT is a bit shocking to hear that companies can't pay their employees because of the financial situation. I guess there's enough big companies out that in this situation that makes it a problem. But really, there's too many people and businesses that rely heavily on credit. This has to stop as we can see it's not healthy. Some say this will cut profits but I think only in the short run. All the big profits we saw over the years seem artificial now anyway. IT is a bit shocking to hear that companies can’t pay their employees because of the financial situation. I guess there’s enough big companies out that in this situation that makes it a problem. But really, there’s too many people and businesses that rely heavily on credit. This has to stop as we can see it’s not healthy. Some say this will cut profits but I think only in the short run. All the big profits we saw over the years seem artificial now anyway.

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