The Palace chairman Simon Jordan has been unable to raise the funds needed to meet the wage bill, and the club appear not to have the money in reserve.
Warnock called an emergency meeting afterSaturday's 3-0 win against Watford to break the news to the squad.
"I explained the situation to the players. I think they were very positive," he said.
"The chairman said he's got a cash-flow problem for about ten days. Simon's doing his best. Obviously the cash-flow is a problem.
"But we've got another home game next Saturday and you've got to accept in the modern day that these things happen."
Watford’s financial future still looks grim despite the club’s chairman loaning the club £1million to ensure survival until January.
The club’s holding company Watford Leisure PLC warned on Monday that it needed £5.5m in funding to ensure the club could continue to run until the end of the season.
In Monday’s statement, released to the Stock Exchange, Watford Leisure warned they only had funds to operate until December 22 and had failed to raise additional capital from shareholders.
In addition to the £5.5m needed in operating costs the company has an outstanding loan of £4.9m to Valley Grown Salads which is secured on the club’s Vicarage Road stadium.
The Hornets were given a slight boost on Sunday when they were drawn away to the Premier League side Chelsea in the FA Cup third round, a tie which will provide a welcome boost in income.