PAYROLL, A ‘thorn’ in the flesh for a Small Business Owner…..that Elite Expert Can Remove!
I’m probably going to quote this until the cows come home and for me it never gets old; “While good business ideas are plentiful, many entrepreneurs struggle to understand payroll taxes, health care and other thorny issues… In other words, they don’t have the financial literacy to scale their businesses and attract investors.” THIS QUOTE WAS TAKEN DIRECTLY FROM Shark Tank Entrepreneur, Daymond John and Founder of FUBU, titled the Number 1 thing Entrepreneurs need. As I so eloquent state each time, this quote was life for a message I had been teaching and preaching. While the message was and is true, someone with a name saying it gave it more validity for some people.
Payroll and the payroll taxes are definitely a ‘thorny issue’ and one that I’ve watched a lot of small businesses get in trouble for or concerning. PAYROLL, is the thing that takes an entrepreneur to the next level as he or she becomes a business owner. When you have employees it is then you’ve become a business owner and not just an entrepreneur working alone. You’ve increased your ability to make more money by adding more hours and skillset. At the same time there has been an added expense, a potential worry, another person to be concerned about and their livelihood. While hiring someone or having the ability to add someone to your company or dream is good, it’s not easy, simple or worry-free, thus the category of ‘thorny’ issue.
Just because one can do somethings doesn’t mean he or she should do things! Payroll is one of those things. Many business owners attempt to cut cost and handle things personally. The advertisements for certain software often allude to the fact that not only is it cheaper but that it’s easy to do or perform duties alone and I’m afraid this isn’t the case! Payroll is part of the financial function of a business and it would be considered an addition to the Accounting Department while working closely with the Human Resource Department. Simply put it’s a professional task that requires skillset and knowledge. Did you know that you must register with the Unemployment Office? Did you know that you must register with your State Office? Did you know the rules, regulations for filing and payment? Small business owners have the option and the key word is option to pay his or her payroll taxes quarterly. Most business owners stop right there and report their payroll taxes quarterly. According to Federal guidelines this option is based on the total payroll (a look back) as it were:
“If your payroll tax obligation is less than $2,500 in a quarter, you can deposit these taxes with a “timely filed return” (assuming a Form 941).
If your total payroll taxes for the “look back period” were $50,000 or less, you are a monthly depositor.
If your total payroll taxes for the “look back period” were more than $50,000, you make deposits on the semi-weekly schedule.”
It would seem reasonable and sensible to pay the payroll taxes only when due which is the advice any financial person would give. The concept is to hold the money in your account drawing interest until it has to be paid out. It makes financial sense right? Right! and Wrong! For most small businesses, large payments of cash greatly affect the cash flow. If the payroll taxes are held in a separate account, if the payroll taxes are accounted for each payroll and the amount due remain in that account; then and only then; waiting isn’t a bad thing! HOWEVER, here’s what I know, 1) most small business owners are not accustomed to leaving cash sitting. 2) A business owner’s finances are handled much like their personal finances which means that the cash which is supposed to draw interest isn’t doing so. Usually there is still a ‘robbing peter to pay paul’ method of managing cash. That style of management generally means when it’s time to pay payroll taxes the money isn’t there. Not paying payroll taxes is a tricky thing. A company can delay and escape them for a season but that season will dry up quickly and come with massive penalties and interest charges; enough to make a business go out of business!
Just because you can do something, doesn’t mean you should do it! Payroll is one of those things. Saving money is great but not if it cost you the entire company to do so.
Elite Expert Business Solutions is excellent when it comes to the ‘thorny’ issues of payroll and bookkeeping. You spend 80% of your time doing the things that make YOUR Company Money and pass the 20% to Elite.
Queen ‘B’ of Doing Business Better, LLC
