Crisis Payroll Accounting – What Happens When US Businesses Cannot Meet Their Payroll

Most of Americans live paycheck to paycheck and one recent research study which was quite alarming showed that the average American has less than 2.2 weeks of savings if their income stops, after that they are living off credit cards if they lose their job.Foreclosure on their home is almost inevitable, for some this is regardless if they are able to get a job within the next two months. Yes, there is unemployment insurance and a few safe guards but they are not enough.Worse, many businesses have lines of credit and they use these lines of credit as needed in tough economic times or when they hit a slow spot in the seasonality of their business model. But if for some reason those credit lines are not available, they will have no choice but to lay-off or furlough their work force.The New York Times has a full page article in the first week of October on the problems that businesses deal with when their credit lines are cut off or dry up. Currently, with the banking situation the way it is many businesses, small, medium and large are in big trouble and that means all their employees are too.And employees that no longer have jobs cannot meet their debt obligations; credit cards, car loans and home mortgages, which leads to further decay of financial markets and prolongs any economic turn-around. The USA Today sent out this news alert recently:”The Labor Department says employers slashed payrolls by 159,000 in September, the most in more than five years. It was a worrisome sign that the economy is hurtling toward a deep recession.”The companies have no choice by to cut costs and lay off employees as the consumer tightens their belts due to the current economic situation, causing a downward spiral. Looks like life as a payroll account just got a little more serious didn’t it?