As all small business owners can attest, cash flow is fluid, ebbing and flowing throughout the course of the month based on a wide variety of variables.
By Laurent Sellier
From the cost of supplies and inventory going up unexpectedly to late payments from customers, and a million other factors, cash flow can have a profound impact on payroll. It’s not always possible for entrepreneurs to perfectly predict where their cash flow will be on the 1st and the 15th of every month or whenever their pay day falls. This can leave a business at risk of not getting their employees paid when they’re supposed to, which can lead to unnecessary problems and headaches for everyone involved.
And many businesses have experienced this cash flow crunch. According to a recent study from my company, Intuit QuickBooks, the majority of small businesses (68 percent) have had to move money around in order to make payroll, and nearly a third of business owners (32 percent) have paid their employees late due to cash flow issues.
Payroll is not only a typical business’s largest expenditure, but like rent or utilities, it is also an overhead expense that is time sensitive. Workers not only expect, but depend on getting paid on a specific, promised date. A small business who cannot guarantee the timely payment of its workers will have trouble hanging onto them. Another study from QuickBooks Payroll and TSheets found 18 percent of employees who work for small businesses say they would quit after a single late paycheck, and 17 percent said they would quit after just one inaccurate paycheck.
Luckily for today’s entrepreneur, there have been several recent innovations in the payroll space that make getting employees and contractors paid on time, while maintaining positive cash flow, easier than ever.
So how can business owners can hang onto their funds longer while still making payroll?
The answer is to embrace modern technology instead of relying on old, outdated methods to process payroll and track employee or contractor work. The days of paper timesheets, time clocks or managing employee hours manually through a spreadsheet should be far behind a small business in 2019. Instead, they should be using mobile-friendly time tracking software or apps to get a more accurate, comprehensive and always up-to-date picture of their labor costs for their next payroll run.
Furthermore, if a business owner is currently running payroll on a Monday in order to get employees paid by Friday, they are living in the past. Businesses can now keep the money in their accountant until the day employees are actually paid, preventing non-sufficient funds situations. This update in the payroll space also gives business owners more time to fix a mistake, add an employee or otherwise adjust their payroll run while still guaranteeing that all the workers will be paid on time and accurately.
For all small business owners who struggle with cash flow–which accordingly to our research is 61 percent–I recommend looking at payroll practices and examining if there are any opportunities to modernize. Embrace the technological advancements available such as time tracking software and new payroll offerings. Taking advantage of these technologies in payroll could have a profound impact on a business’s cash flow and ultimately its success.
Laurent Sellier is vice president and business leader of QuickBooks Payroll within Intuit’s Small Business Self-Employed Group. Prior to joining Intuit, Sellier held roles at Eventbrite, Twitter and Amazon focused on product management. He is a graduate of HEC Business School in Paris.