Who to Pay When Cash is Short

When your business is short on cash, and you can’t pay everybody that needs to be paid, it’s time to take triage. There are two payments you should protect before you start playing whack-a-mole with vendors:

1. The government (payroll remittances, GST/HST, source deductions)

2. Your employees (wages)

These are the two groups that can shut you down the fastest if payment is late.

1) Pay the government (especially payroll remittances)

If you fall behind on remittances, you’re going to find yourself with a compounding problem:

• Penalties and interest stack up.

• CRA can move from letters → collections → freezing/garnishments.

• Your ability to operate gets squeezed, right when you need flexibility most.

You must remember that money from source deductions and sales taxes isn’t actually yours. You were just holding them in trust for the respective governments. Treating them like working capital is how a tight month turns into a multi-month mess.

2) Pay employees (because they can leave today)

You can negotiate with vendors. You can’t negotiate with payroll in the same way. Miss wages and you create two problems at once:

• Trust breaks immediately.

• The best people start looking first.

• Then productivity drops, service slips, customers feel it. Suddenly, your cash issue becomes a revenue issue.

If you need your business to function next week, you need your people to show up next week.

“What if I can’t pay everything?”

Then you need to stop hoping it’ll work out and start making deliberate moves. A few options that buy time without lighting a fire with CRA or your staff:

• Call vendors before you miss. Silence is what kills goodwill.

• Cut non-essential spend today. Subscriptions, discretionary purchases, “we might need this.”

• Get serious about receivables. Calls, follow-ups, partial payments—whatever moves money.

• Turn dead assets into cash. Excess inventory, unused equipment, anything collecting dust.

When cash is short, paying whoever is yelling loudest is a bad strategy. Protect remittances and payroll first. Negotiate with everyone else second.

And if this is happening more than once in a blue moon, don’t chalk it up to “a rough patch.” It usually means you’re missing a forward-looking view of cash. A simple 13-week cash forecast will show you the cliff while you still have room to steer.

Hopefully you never find yourself in this situation, but if you do, please reach out to me by clicking the Contact link above!