What should I do if I don't have enough money in my operating expense account to pay all my expenses?

Diane GardnerFounder, Adept Business Solutions · Profit First Professional

What Happens If You Don't Have Enough Money in Your Op Ex Account? 'Under The Covers'

13 Jan 2021 · 2 min

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1:30

In this Profit First Q&A, Speaker A asks what to do when the operating expense (OpEx) account lacks sufficient funds to cover bills. Speaker B explains that a cash‑flow shortfall signals a business problem that must be fixed by either cutting costs or increasing margins (e.g., raising prices). For the immediate crisis, the recommended steps are: (1) stop incurring new expenses at the current rate, such as canceling subscriptions; (2) proactively contact vendors to request delayed payment, communicating the situation honestly; and (3) avoid taking money from the profit account unless all other adjustments have been made, as using profit funds is a last‑ditch measure. The response emphasizes swift, transparent actions to right‑size the business and preserve the integrity of the Profit First system.

Questions this video answers

Immediately stop incurring new expenses, cut or pause subscriptions, contact vendors to request delayed payment, and avoid taking money from the profit account unless you have first cut costs or increased margins; the profit account is a last‑ditch option.

Chapters

Alright, in Profit First, what happens if I don't have enough money in my operating expense account to pay all my expenses? Where do I take it from?
So that happens. It happens a lot. If you can't pay your bills, is first and foremost your business speaking to you? You can't pay your bills, you can't afford your bills, and that means we need to adjust things. There's only two things you can adjust, by the way, is you can cut costs or you can increase margin. Sell more things at a higher price point. Now, in the immediate circumstance where you can't pay your bills, the actions to take are as follows. Stop incurring more expenses at the same rate. So, you know, can you cut some subscriptions or whatever, but you have to immediately look at that. Secondly is we want to see if we can afford time. Call those vendors and say, listen, I'm going to be a little late on the bill. Communicate proactively, but actively. Here's what not to do. Don't take from your profit account right away and try to cover the bill. Now you're starting to play a shell game in covering things. You can't pay those bills, there's something fundamentally wrong. And it's a little bit painful to call vendors and tell them you're not going to pay them on time and so forth, but to start making those adjustments will right-size the business. Then there may be a circumstance where you do have to take from the profit account to cover expenses because you have that responsibility. But unless you make those adjustments first, don't touch that profit account. That's a last-ditch effort.