Can I make payroll this month?
The question that wakes business owners up at 3 a.m. You know the number is in your accounting software somewhere. Here's exactly how to check, step by step.
The short answer
Can you make payroll?You need two numbers: your current cash balance and your total payroll obligation for the month. If cash is greater than payroll, you're covered. If it's close, you need to check what else is due this month. Below, we'll show you how to pull both numbers.
Why payroll coverage is the first survival check
Missing payroll is not like missing a vendor payment. You can call a vendor and negotiate 15 more days. You cannot call your employees and tell them their rent money is late. Missing payroll triggers resignations, lawsuits, tax penalties, and a reputation hit that follows your business for years.
The scary part is how suddenly it happens. Revenue looks fine. Your P&L shows a profit. But your cash is tied up in unpaid invoices, a quarterly insurance premium just hit, and payroll runs in four days. Profit on paper does not mean cash in the bank.
This is why payroll coverage is the single most important number in your business on any given day. Not revenue. Not margin. Can you pay your people?
What payroll coverage ratio actually means
The payroll coverage ratio is simple: your available cash divided by your payroll obligation. Here is the math:
A ratio above 1.0 means you can cover payroll from cash alone. But that does not mean you are safe. You also have rent, software, loan payments, and vendor bills due this month. A ratio of 1.5x or higher gives you breathing room. Below 1.2x, you are cutting it close. Below 1.0x, you have a problem.
How to check payroll coverage in QuickBooks Online
You need to pull numbers from two places: your Balance Sheet for cash and your payroll records for the obligation.
- 1Check your cash balance
Go to Reportsin the left sidebar. Search for “Balance Sheet.” Set the date to today. Look at “Total Bank Accounts” under Current Assets. That's your available cash.
- 2Find your payroll total
Go to Reportsand search for “Payroll Summary.” Set the date range to the current month. The total at the bottom shows your gross payroll plus employer taxes and contributions. That is your payroll obligation.
- 3Do the math
Divide your cash balance by your payroll total. If you have $48,000 in the bank and payroll is $32,000, your coverage ratio is 1.5x. You can make payroll with $16,000 left over.
- 4Check what else is due
Go to Reportsand search for “Accounts Payable Aging Summary.” This shows vendor bills that are due. Add your payroll obligation plus these bills. Compare that total against your cash. If cash is less than the combined total, you need to prioritize or accelerate collections.
- 5Check incoming money
Go to Reportsand search for “Accounts Receivable Aging Summary.” Look at the “Current” column. Those are invoices due soon. If you need them to cover payroll, you are depending on your customers paying on time. That is a risk, not a plan.
Total time: about 10 minutes across three reports. But this only tells you about this month. You will need to do it again next month.
How to check payroll coverage in Xero
Same logic, different reports. You need your cash position and your payroll obligation.
- 1Check your cash balance
Go to Accounting → Reports→ “Balance Sheet.” Find “Bank” under Current Assets. That's your cash on hand.
- 2Find your payroll total
Go to Payroll → Pay Runs. Look at the current month's pay runs. Add up the gross pay plus employer contributions. If you use Xero Payroll, the pay run summary shows the total cost per run.
- 3Calculate coverage
Divide your bank balance by total payroll. Example: $55,000 cash / $38,000 payroll = 1.45x coverage.
- 4Factor in other obligations
Go to Accounting → Reports→ “Aged Payables.” This shows what you owe vendors. Add payroll plus payables and compare against cash.
Total time: about 10 minutes. Xero's payroll module gives you a cleaner per-run total, but you still need to pull the Balance Sheet separately for your cash number.
What it takes to check payroll coverage every month
The steps above take 10 minutes if your books are current. The problem is that “if.”
- Your bookkeeper needs to be caught up. If expenses are not entered, your Balance Sheet is wrong and your cash number is misleading.
- You need to remember to check. Payroll panic usually hits two days before payday. By then, your options are limited. The check needs to happen at the start of the month, not the day before payroll runs.
- Cash alone does not tell the full story. You might have $50,000 in the bank, but if $30,000 of that is earmarked for quarterly taxes, insurance, and a vendor payment, your real available cash is $20,000. The Balance Sheet does not separate committed cash from free cash.
Or get the answer automatically, every month
Bottomline connects to your QuickBooks or Xero account and checks your payroll coverage automatically on the first of every month. It compares your cash position against your payroll obligation and upcoming bills, then gives you a clear answer:
No report pulling. No manual math. No remembering to check. On the first of every month, you get a clear yes or no, plus the context you need if the answer is “barely.”