02 Feb Consequences Of Running Payroll Late
In today’s economy, keeping your business afloat is no easy task. People are spending less, they are worried about the future, and the markets are volatile. Small businesses may start to look at where they can cut expenses in order to maintain a positive cash flow. Too often, a business owner will decide to delay payroll in an effort to make “better” short term use of his or her available funds. However, this is both illegal and a mistake that can have dire consequences. One area that should never be compromised is payroll.
Paying employees late can have a plethora of ramifications. Other than the obvious impacts of it being illegal as it is a violation of the Fair Labor Standards Act (FLSA) and it being detrimental to your business by affecting employee morale, there are other consequences as well. It is of utmost important to maintain a healthy cash flow so that payroll can be processed on time. If you happen to have a short-term lapse in funds, Payro Finance can assist with payroll financing solutions.
What Happens If You Run Payroll Late?
It may seem like an easy concession – let me run payroll late because the business is low on funds, but delaying payroll can cause detrimental harm. Employees are what make the business. When paid on time, employees are happy and productive. When paid late, employees become disgruntled. Low employee morale translates into lesser productivity, lesser care placed into their tasks, and a sense of indifference about their work.
Delaying payroll causes unrest in the business. It halts the symbiotic functioning of a well-oiled business. Employee productivity will plummet along with any sense of pride usually placed in their work. Pride may be an intangible feeling, but it translates tremendously into one’s work. Run your payroll on time and employees will be content, feel respected, and continue to perform at their optimal level.
The Late Payroll Tax Penalty
Besides for detrimentally affecting employee morale, delaying payroll can have another equally serious consequence. If payroll is not done on time, that means payroll taxes are not paid on time. As we all know, the IRS does not take lightly to delayed or missed payments. You will be penalized with a payroll tax late payment tax penalty. Besides for the penalty itself, you will also incur interest on the missed payments. Interest rates can vary from 3% to 6% of the total amount owed.
The 941 late filing penalty will end up costing you more than you potentially saved from delaying your payroll. So while it may be tempting to solve negative cash flow by delaying payroll, be fiscally responsible and don’t incur additional business costs and IRS headaches. Run your payroll on time.
Managing Your Cash Flow To Avoid Missed Payrolls
Proper management of cash flow is integral to running your business properly. In order to avoid missed payrolls, there needs to be an efficient cash flow management system in place. Managing your cash flow starts with a strong working relationship with your accounting team. Sit down with them to project future cash flow and structure your business operations accordingly. Discuss how to manage credit card debt and minimize expenses. Most importantly, work with them to keep tabs on all outgoing and incoming funds.
Once you have a strong symbiotic relationship with your accounts receivable team, you can start to improve collections on open invoices. Always make sure invoices are sent out promptly and offer clients incentives for early payments. Cash flow problems are so often a result of low cash inflow. This means that you are not receiving payment from your customers in time to cover your regular business operating expenses, and most importantly in this case, payroll expenses.
Another important area to be on top of is budgeting your business expenses. On a regular basis, you should examine all overhead costs. See what is no longer necessary and get rid of it. Business needs and expenses change all the time, and too often, you end up paying for a service you no longer need simply because you forgot about it. At the same time, work with your current vendors to negotiate better payment terms. If they are unwilling, do research and find new vendors. In today’s day and age, there are always competitors willing to outbid each other. Take advantage of that.
Sometimes, a business can do all of the above and still have temporary cash flow issues. Stuff happens. The world of business can be a volatile one. In such a case, payroll funding can be a tremendous help, aiding you from delaying payroll and all the detrimental consequences that come along with it.
Using Payroll Funding When You Are In A Pinch
Payro Finance is a payroll funding company. Our goal is to help small business owners keep their businesses afloat. We understand the importance of cash flow and how sometimes the smallest temporary shortage can unfairly impact an otherwise successful company. If you are in a pinch and need money for payroll, we are here to help you.
Why? Because even when employing all of the aforementioned cash flow management techniques, small businesses can sometimes still suffer from low cash flow. It doesn’t mean you are doing anything wrong. It could be as simple as waiting on a large sum of money from an open invoice with 30-day payment terms. But what if you need to run your payroll before the 30-day mark comes along?
Payro Finance offers payroll funding to help you with that exact problem. We can provide you with a quick line of credit to offset any payroll expenses. Unlike traditional banks and other lending products which can typically take weeks to approve a loan, Payro works fast because we understand that a short-term cash flow issue needs a remedy now, not later. And unlike traditional loans, we do not require collateral, or even worse, get involved in your business and dictate the way you should conduct operations.
As long as you have consistent business revenue, Payro will approve your payroll funding. You can even receive financing for your entire business’s payroll, with a maximum amount of $500,000. When submitting payroll, you can simply opt-in to receive payroll financing. Once opting-in, your business will receive funds on the same day, ensuring that your payroll runs on time without any delay.
No one loves to borrow money, but at Payro we make the experience as easy and seamless as possible. Payroll financing is different from typical loans. We don’t drag out the process or ask a million questions, demeaning your business and its operations in the process. We simply understand the need for short term cash influx. We have been there and understand what it means when a business is temporarily short on funds and needs to meet its payroll deadlines. Our short-term loans are designed to help keep you afloat until your funds balance out again.
Utilize our resources and let us help you avoid the detriments of not making payroll on time. Keep your employees happy, morale high, and productivity higher, as we navigate our way into whatever the future holds.